Another Step in Libya's Rehabilitation

Libya is invariably slow to react to events in the outside world, but the Scottish legal review into the Lockerbie bombing case poses some intriguing questions for Muammar Gadafy and his rapidly improving relations with the west.

No one has publicly questioned the fact that Abdelbaset Ali Mohmed al-Megrahi, who was convicted of the Pan Am bombing at his trial in the Netherlands in January 2001, was a Libyan intelligence agent, though Tripoli has never confirmed this.

Megrahi himself has always protested his innocence, and the decision to allow him to challenge his conviction for a second time is an extraordinary turn of events that should delight the Libyan government while casting its own behaviour in a new light. For Mohammed Elzwi, a former Libyan ambassador to Britain, this dramatic move "will have good consequences".

Gadafy himself always denied responsibility for the worst act of terrorism in British history. But bizarrely, he sometimes seemed to imply that the bombing was, as some still believe, retaliation for air strikes on Libya in 1986. At that time, Margaret Thatcher had allowed US planes to fly from British bases after two US servicemen died in the bombing of a Berlin disco.

"Locker A", Gadafy once called that. The deadly explosion on the packed Boeing 747 over a sleepy Scottish town was "Locker B".

Libyans who hope for democratic change in their homeland expressed alarm at the prospect that the colonel might end up being vindicated. "It will be a big success for the regime if they can be seen to have brought British justice to its knees," said one political exile.

From 1991 onwards, resolving the case became the indispensable key to improving the country's troubled relations with the west after the imposition of UN sanctions to force it to surrender Megrahi and a second man, who was acquitted. The breakthrough came in 1999 when Robin Cook, then foreign secretary, overturned previous policy to agree that the trial could take place under Scottish law in a neutral venue.

Backed by Nelson Mandela, and with the discreet help of Saudi Arabia's Prince Bandar, Cook constructed a policy based on the handover of the two suspects with a tacit understanding that they, not the Gadafy regime, would stand trial for the murder of 270 people.

The surrender of the two brought the re-establishment of relations between London and Tripoli. Once the trial was over, the way was open for a political resolution of the affair. That finally came in August 2003 when the UK and the US agreed a formula with Libya: the key phrase was that Libya "has facilitated the bringing to justice of the two suspects charged with the bombing of Pan Am 103, and accepts responsibility for the actions of its officials".

That triggered a UN Security Council resolution to lift the sanctions. Crucially though, it did not constitute an admission of guilt. That would have required a clear statement that Megrahi was guilty of the bombing and had been acting on behalf of the Libyan state when he carried it out.

Experts believe Libya could deny playing any role if Megrahi's conviction were eventually to be quashed. Some say it may even demand compensation from the US and Britain, perhaps to recover the millions paid in compensation to families of the victims.

In late 2003 the Lockerbie deal was followed by another volte-face that was a ticket to renewed international respectability: this time it was the surrender of Libya's rickety arsenal of weapons of mass destruction in the wake of the Iraq war, in a deal agreed secretly with CIA and MI6.

Since then, western leaders including Tony Blair have been beating a path to the colonel's tent. Foreign energy companies are again a huge presence in Libya, bidding to exploit the country's vast oil and gas reserves and finance urgent modernization work that could not be done under the UN sanctions.

Even before settling the Lockerbie affair, Gadafy had cleared up the older problem of Libyan arms deliveries to the IRA. Now he is hoping for a new breakthrough with Europe by resolving the vexed issue of the Bulgarian nurses and a Palestinian doctor accused of infecting hundreds of Libyan children with the HIV virus. Hopes are high too of an imminent resolution, with help from Tripoli, of the Scotland Yard investigation into the murder of PC Yvonne Fletcher, who was shot from inside the Libyan embassy in London 1984.

So, as Libya continues to clean up its act, Lockerbie - the most notorious and complex case of them all - enters yet another phase. It seems unlikely to end before the 20th anniversary of the atrocity in 2008.