In a move paving the way for lifting of United Nations sanctions on Libya, Tripoli has accepted responsibility for the 1988 bombing of a Pan Am flight over Lockerbie, Scotland, renounced terrorism and pledged to pay compensation amounting to $2.7 billion to the victims.

Two Libyans were indicted in connection with the bombing of the airliner that killed 270 people, including 11 on the ground. To force Mohammar Gaddafi's government to hand them over, the UN Security Council had banned arms sales and air links to Libya.

Under a 1992 UN resolution, sanctions against Libya were not to be lifted until the government acknowledged responsibility for the bombing, paid fair compensation, renounced terrorism and disclosed all it knows about the explosion.

The agreement for the compensation - $10 million for each victim - came after days of negotiation among Libyan, US and British officials. The first payment could be made as early as next Tuesday, officials said.

However, it is yet unclear whether France would allow sanctions to be lifted as it is seeking higher compensation from Libya for the victims of the 1989 downing of a French UTA airliner.

The possibility of France blocking the lifting of sanctions has angered the US as it could delay payment of compensation to the victims of the Pan Am bombing. Diplomats said Paris had privately threatened to veto lifting of sanctions unless its demands are met.

However, lifting of the sanction is only symbolic as they were suspended in 1999 when Libya handed over the two suspects in the Pan Am bombing, Abdel Basset Al Megrahi and Al Amin Khalifa Fahima, for trial in the Hague by a Scottish court.

Megrahi was convinced in the case while Fahima was acquitted.

Under the agreement reached with the US, Libya will pay $4 million to each victim once the UN lifts sanctions, another $4 million when the US lifts its sanctions and the final $2 million when it is taken off the US list of states sponsoring terrorism.

Libya made the commitments in a three-page letter delivered to the UN Security Council on Friday.

In the letter to the Council, Libyan envoy Ahmed Own said it accepts responsibility for the 'action of its officials' in the destruction of the Pan Am airliner.

Shortly after the letter was delivered, United States and Britain informed the UN that Libya has met the conditions for permanent lifting of sanctions.

However, the White House said the US would maintain its own embargo, or even intensify it, till Tripoli ends the 'threatening elements' of its policy.

In a strongly worded statement, White House spokesman Scott McClellan castigated Libya for its 'poor' human rights record, lack of democratic institutions, 'destructive' role in 'perpetuating' regional conflicts in Africa and 'worrisome' pursuit of weapons of mass destruction.

"The US will intensify its efforts to end threatening elements of Libyan behaviour and US bilateral sanctions on Libya will remain in force until Libya addresses these concerns," he said.