WASHINGTON — Citing Libya's efforts to abandon its pursuit of weapons of mass destruction, President Bush lifted most U.S. trade sanctions against the North African nation Monday, clearing the way for $1.3 billion to be paid to the families of those killed when a bomb brought down Pan Am Flight 103 over Scotland in 1988.
The president's move also opens the way for direct air service between Libya and the United States and the possible American importation of Libyan oil.
The White House described Bush's actions as "another milestone" in his post-Sept. 11 drive to combat the proliferation of nuclear, biological and chemical weapons.
Even as the two nations pursued a path toward normal diplomatic relations, however, U.S. officials noted Monday that Libya remained, in the eyes of the American government, a "state sponsor of terrorism." That official designation forbids U.S. companies from exporting equipment with that could have military applications to the country.
U.S. officials remain "seriously concerned" about allegations of Libyan involvement in a plot to assassinate Crown Prince Abdullah of Saudi Arabia, White House Press Secretary Scott McClellan said.
In lifting the commercial sanctions, Bush was acting in the face of a threat that, if the U.S. did not end them by Wednesday, Libya would cancel its $1.3 billion in compensation payments due to families of victims of the airliner bombing.
The move was partly symbolic, however, because the president, in effect, had suspended the bulk of the commercial sanctions in April.
Bush, campaigning in New Hampshire and New York City, did not personally address the matter Monday.
Instead, the White House made the announcement by releasing the presidential executive order and a statement by McClellan.
"Over the last nine months, Libya has worked with international organizations and the United States and United Kingdom to eliminate its WMD [weapons of mass destruction] and longer-range missile programs in a transparent and verifiable manner," the spokesman said.
"Libya's efforts open the path to better relations with the United States and other free nations."
At the State Department, spokesman Adam Ereli said the dialogue between Washington and Tripoli, the Libyan capital, would "deepen -- on the subject of human rights, political liberalization and economic modernization, as well as regional political developments."
He also praised Libya for providing an access corridor through its territory to Sudan so humanitarian efforts could reach more than 1 million people displaced in fighting among rebel and militia groups in Darfur.
On the campaign trail this year, Bush regularly cites the experience with Libya as proof that war -- such as that being waged in Iraq -- is not the only way to disarm a hostile nation, and that Iran and North Korea should take note that they too can reap economic benefits by renouncing their unconventional weapons.
Under the longtime rule of Moammar Kadafi, Libya had been widely regarded as an outlaw regime. It took responsibility for the downing of the Pan Am jet, which killed 259 people on the plane, including 189 Americans, as well as 11 people in the Scottish town of Lockerbie.
But last Dec. 19, the U.S., Britain and Libya announced that Kadafi would shut down his nuclear weapons programs and allow international inspectors to enter the country to monitor its efforts to end its status as an international pariah.