U.S. State Department officials meet Friday with families of victims of Pan Am flight 103 on the emerging deal under which Libya is to take responsibility and pay compensation for the 1988 airliner bombing over Lockerbie, Scotland. However a potential veto by France in the United Nations is looming as a new obstacle.

The French veto threat has raised a new complication in efforts that appeared to be moving swiftly toward a financial settlement of the Pan Am 103 case and an end to international sanctions against Libya.

Lawyers for family members of the 270 victims of the airliner bombing Wednesday signed an agreement setting up a Libyan-funded $2.6 billion compensation account.

That was to be followed by a Libyan admission of responsibility for the 1988 terror attack and the lifting of U.N. sanctions against the Muammar Gadhafi government.

However, France, a permanent U.N. Security Council member, has threatened to veto the lifting of sanctions unless Libya increases compensation for a 1989 bombing of a French UTA jetliner also attributed to Libyan agents.

At a briefing here, State Department spokesman Tom Casey said French Foreign Minister Dominique de Villepin conveyed his government's intentions in a telephone talk with Secretary of State Colin Powell late Wednesday.

Mr. Casey declined to discuss the implications of the French stand, saying that in any case Libya still is rather far from fulfilling the terms for ending its international isolation.

"Libya has still not fully met U.N. Security Council requirements, which includes acceptance of responsibility and payments of appropriate compensation. Libya does know what it needs to do. This has been discussed thoroughly and fully over time," he said. "And there are no shortcuts as you know. The bar will not be lowered. And this is about Libya getting out of the terrorism business, nothing more and nothing less."

Other U.S. officials expressed irritation over the French veto threat, with one accusing France of holding the painstakingly-negotiated Lockerbie deal hostage.

In 1999, Libya paid out a total of $33 million to families of the 170 people killed in the downing of the UTA jetliner over Niger, a small fraction of the compensation due to be paid in the Pan Am 103 case.

The French government has been under pressure from the UTA families to get a better deal, but one U.S. official said that doing so by harming the interests of the Pan Am families would be "outrageous."

The issue looms as a new irritant in a U.S.-French relationship only now recovering from strains in the run-up to the war in Iraq earlier this year, when the Paris government blocked U.S. efforts to get a Security Council resolution authorizing military action to remove Saddam Hussein.

Pan Am family members will convene at the State Department Friday for a briefing on the latest developments from U.S. Assistant Secretary of State William Burns.