The White House surprised its European allies with a sudden announcement that the US is to seek tough new sanctions against Tripoli at the United Nations Security Council next month.
The move came after relatives of the American victims of the bombing met the US National Security Adviser, Anthony Lake, who assured them of "the administration's unwavering opposition to terrorism and its continuing effort to bring about justice on behalf of Libya's victims".
But there was scepticism in Western European capitals about the effectiveness or desirability of an oil embargo. Spokesmen for the Foreign Office and the French Foreign Ministry said they had not yet been consulted by the Clinton administration. Diplomats did not expect the US proposal to win immediate or automatic support in the Security Council.
The Libyan leader, Colonel Muammar Gaddafi, yesterday proclaimed his defiance of the existing UN sanctions by proposing to fly a group of Muslims to Mecca for the annual pilgrimage. He unhesitatingly described all of them as "ready for martyrdom".
Libya has refused to extradite the two wanted men, Abdel Basset Ali Meghrahi and Lamen Khalifa Fhimah. Both were indicted by the US and Scottish authorities in 1991 after a forensic investigation. Limited UN sanctions, banning air travel and imposing financial restrictions, were enacted in 1992.
Western security officials believe the two are being protected because they are intelligence agents and close tribal relations of Major Abdessalam Jalloud, the second most powerful man in the Libyan regime. Libya says the men are innocent and would not receive a fair trial in the US or in Scotland.
The stand-off prompted the US administration last week to add the men to the FBI's Ten Most Wanted list and to offer a $4m (£2.5) reward for their capture. The attempted prosecutions have also aroused controversy in the West, coupled with allegations that the possible involvement of Syria and Iran in the bombing has been covered up for political ends.
The Foreign Secretary, Douglas Hurd, recently took an unusually high- profile stance in the House of Commons to reject all the claims of a conspiracy to conceal the truth.
The US move to force Libya's hand is unlikely to be welcome in Europe because most European governments consider the situation almost ideal. Colonel Gaddafi has been rendered politically impotent. His economy is subject to stringent restrictions but his domestic powerbase remains relatively stable, preventing the overthrow of his regime and its possible replacement by fundamentalists.
There are also strong economic arguments in Europe against halting the export of Libyan oil. A militant but small-capacity Opec producer, Libya earns about $10bn a year from exports estimated at 1.2m barrels per day (bpd). Italy depends on Libyan crude for 500,000 bpd or 25 per cent of its daily needs, followed by Germany, Spain and Greece. Libyan oil is prized for its high grade quality and would be difficult to replace.
Despite its radical rhetoric, Colonel Gaddafi's regime has also gone to considerable lengths to construct a web of commercial relationships with international companies.