US eases sanctions on Libya

The Bush administration also said it would let Libya set up a diplomatic presence in Washington and lifted a travel ban, reflecting the US determination to keep pace with Libya's moves on illicit arms.

Libya was eager to bring back US companies, especially in the oil industry, its main source of foreign earnings. Opec member Libya produces around 1.4 million barrels of oil daily.

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Tripoli has retracted statements by Prime Minister Shokri Ghanem on Tuesday denying Libya's guilt in the 1988 Lockerbie airliner bombing, which killed 270 people. His statement prompted a two-day delay in lifting the travel ban.

But the retraction did little to soothe family members of the Lockerbie victims, some of whom angrily accuse Washington of being too easy on Libya because it wants access to its oil.