Understandably, the Libyan government is running for cover after the Bush Administration rebuffed a proposal that would condition money for the families of victims of Pan Am Flight 103 on America bending over backwards to please Libya. Having refused to take responsibility for the atrocity since 1988, Muammar Gadhafi apparently now thinks that he can rejoin polite society by setting up an elaborate bribery system, seemingly intended to twist the families of the victims into a lobby for Libya. Victims, the settlement sets forth, would get 40% of their money if the United Nations permanently lifts sanctions against Libya; they would get another 40% if America does likewise; the last 20% would come if Libya’s application happens to get misplaced when America compiles its yearly list of terror sponsoring states.

We may be wrong, but we doubt that even the prospect of millions of dollars will have the families of murder victims protesting for sanctions to be lifted from the nation that sponsored the murders, nor are the families likely to support that nation being handled with kid gloves by the State Department. A payment of $10 million per victim, for a total of $2.7 billion, is not on its face an insulting sum, but the money is in no way what is important. Any financial settlement must be accompanied by an assumption of responsibility for the crime and evidence that Libya no longer supports terrorists, neither of which has been forthcoming. After all, it took until 1999, with a promise that Colonel Gadhafi himself would not be prosecuted, to get Libya to even hand over suspects in the bombing, one of whom, Abdel Basset Ali Megrahi, was convicted in February of last year.

As for sponsoring terrorism, the State Department said last week that Libya appears to have disentangled itself for the most part, but may still have “residual contacts with a few groups.” On the whole, we would not say that such progress merits significant rewards for Libya. The U.N.’s sanctions have already been suspended, which would make their permanent lifting an unnecessary gesture of goodwill. The American sanctions predate the Lockerbie incident, and can well postdate any financial settlement. As for getting off the American list of state sponsors of terrorism, there’s always been a simple path to the exit: Stop sponsoring terrorism. The lawyers for the victims families are driving hard to the hoop for this settlement. The victims’ families are negotiating, and not the American government, so the decision to take it or leave it will be made privately. But any trade of sanctions for a settlement will make it look like America’s terrorism policy is for sale.