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Citing Libya’s efforts to abandon its pursuit of weapons of mass destruction, President Bush on Monday lifted most U.S. trade sanctions against the northern African nation, clearing the way for $1.3 billion to be paid to the families of those killed when a bomb brought down Pam Am Flight 103 over Lockerbie, 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, 2001, drive to combat the proliferation of nuclear, biological and chemical weapons.

Even as the two nations pursue a path toward normal diplomatic relations, however, U.S. officials noted Monday that Libya remains, in the eyes of the American government, a “state sponsor of terrorism.” That official designation forbids U.S. businesses from exporting to the North African country any equipment with potential military applications.

U.S. officials remain “seriously concerned” about allegations of Libyan involvement in a plot to assassinate Crown Prince Abdullah of Saudi Arabia, said White House spokesman Scott McClellan.

In lifting the commercial sanctions, Bush was acting in the face of a threat that, if the United States did not act by Wednesday, Libya would cancel its $1.3 billion in compensation payments due to families of victims of the airline bombing. But the move was also partly symbolic because the president, in effect, suspended the bulk of the commercial sanctions in April.

Bush, campaigning in New Hampshire and New York, did not address the matter Monday. Instead, the White House made the announcement by releasing the presidential executive order and a statement by McClellan.

At the State Department, spokesman Adam Ereli praised the bilateral dialogue between Washington and Tripoli, the Libyan capital. He also said Libya would provide an access corridor through its territory to Sudan so that humanitarian efforts could reach more than a million people displaced in fighting between rebel and militia groups in northern Darfur.