Sources close to negotiations say payments to relatives will be
                       announced in two months’ time, after the conclusion of the appeal by
                       Abdelbaset Ali Mohmed Al Megrahi, the Libyan convicted of the
                       killings.

                       An agreement on a form of words and compensation will allow United
                       Nations sanctions against Libya to be lifted and will let US oil and
                       British engineering firms back into the country to secure lucrative
                       contracts. It is certain to be presented by the Libyans as a
                       diplomatic triumph for Colonel Gadaffi.

                       Yesterday there was a warning from some American relatives of
                       Lockerbie victims that they would not accept a cent of compensation
                       unless the Libyan government made a full admission of responsibility.
                       The Libyans have always maintained they had no involvement into the
                       bombing, but are desperate for trade sanctions imposed after the
                       bombing to be lifted.

                       Susan Cohen of New Jersey, whose 20-year-old daughter Theodora,
                       a drama student, was killed when the Boeing 747 was blown out of
                       the sky over Scotland on December 21, 1988, said: “We are not
                       going to take money unless Gadaffi comes clean. No little minimal
                       statement of ‘Oh, well it was a rogue terrorist’, or Libya says
                       mistakes were made.’”

                       Cohen and her husband Daniel are likely to have the support of about
                       one-fifth of the American relatives in their refusal to accept
                       compensation. They will continue their $4 billion (£2.84 billion)
                       lawsuit against the Libyan government, and will step up pressure on
                       the Bush administration to put justice ahead of political pragmatism
                       and economic realities.

                       Cohen said money could not silence them. “I don’t give a hoot for this
                       compensation. Our case is against Libya. I can tell my lawyer, ‘You
                       take this to court’. We want the guilt stamped on Libya. I am not
                       interested in just getting a pat on the head and the money, be it $10
                       or $10m. Money is irrelevant.

                       “In my view, it is appalling to make any deal with Libya while Gadaffi
                       is there. I do feel that after September 11, we should realise where
                       policies of appeasement lead. He is still very much into biological
                       and chemical weapons.”

                       Megrahi was found guilty after three Scottish judges in a specially
                       convened court in the Netherlands decided it was he who, from a
                       shop in Malta, purchased clothes that were in the suitcase
                       containing the bomb. Charred fragments of the clothes were found in
                       wreckage strewn over the Scottish countryside after the disaster.

                       Megrahi was sentenced to 20 years in jail. He has already been in
                       custody for 2½ years.