CAIRO, Egypt (AP) – The United States has decided to remove Libya from its list of state sponsors of terrorism and to renew normal diplomatic ties, a State Department offical yesterday.

But human rights activists in the Middle East said the United States decision had seriously undermined Washington’s drive for democratic reform in the region.

Furthermore, they said, the announcement – including the removal of Moammar Gadhafi’s regime from the US list of nations that sponsor terrorism – signalled the Bush administration was turning its back on Mideast activists who were taking great risks, especially in Libya.

“This is an indication that the United States has never been serious about calls for reforms and respect of human rights in the region,” said Bahy El-Deen Hassan, head of the pan-Arab Cairo Center for Human Rights.

Mahmoud Shamam, a leading Libyan activist, voiced similar concerns in a telephone interview from Washington.

“This was the final and fatal bullet fired by the administration into its initiative to spread democracy and reforms in the Middle East,” he said.

“Everybody in the area will now ask if the United States is after promoting the principle of democracy or its oil interests,” he said.

Cairo-based Fayez Jibril, spokesman for the Libyan National Congress opposition group, said Gadhafi would employ the American opening to further crush dissent inside the country.

“Col Gadhafi will most certainly use this to tighten his hold on the Libyans who aspire for such simple things such as freedom of expression and freedom to have a constitution,” said Jibril.

Secretary of State Condoleezza Rice said the decision to restore ties with the oil-rich North African nation – held responsible for the 1988 bombing of Pan Am flight 103, which claimed 270 lives – was based on Libya’s “continued commitment to its renunciation of terrorism”.

Some in Washington credited the American invasion of Iraq in March 2003 with having convinced Gadhafi that he, too, could be in danger of US military action.

The administration’s decision also comes at a time when it is attempting to shore up relations with major oil producers because of high prices and a shortage of supplies. Libya has substantial oil reserves.

The establishment of normal relations may have come sooner were it not for allegations that Gadhafi’s regime was behind an attempt on the life of Saudi’s Arabia’s King Adbullah when he was crown prince several years ago.

Hints that a US move was afoot were evident when the State Department decided to summon family members of the victims of the Pan Am 103 to Washington for a briefing next week on “US-Libyan relations”.

Gadhafi was once seen by Washington as perhaps the most dangerous man in the Middle East. President Reagan ordered air attacks against Libya in 1981 and 1986, the latter because of suspected Libyan sponsorship of a terrorist attack at a West Berlin disco frequented by American soldiers. Two Americans died there.