In a speech broadcast on Libyan television, Colonel Gaddafi accused the United States and Britain of imposing preconditions. He did not specify his objections, but said the conditions had to be lifted before any trial of the two Libyans - Abdel Baset al-Megrahi and Al-Amin Khalifah Fhimah.

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The Libyan leader has agreed in principle to a plan to put the suspects on trial in the Netherlands under Scottish law. But he opposes a proposal to make them serve their jail sentences in Scotland if they are convicted - something the US and Britain insist on.

In his speech in Tripoli on Sunday, he described the American-British proposal as sterile.

His remarks come at a time when United Nations Secretary-General Kofi Annan is considering going to Libya to try to bring about agreement on the handover of the two Libyans. Mr Annan is currently visiting north Africa.

The British Government declined to comment on Colonel Gaddafi's latest remarks.

BBC Diplomatic Correspondent Barnaby Mason says Colonel Gaddafi's comments appear deeply discouraging, but western officials are reserving judgement on whether they signal a definite refusal to hand the men over.

Libyan and UN lawyers have spent weeks discussing the legal details of any trial.

The Libyans have been concerned about precisely where in the Netherlands the trial would take place as well as where the two would serve any sentences.

Diplomatic sources in New York have said legal issues are less important than the fundamental political decisions that ultimately rest with Colonel Gaddafi.

They say he must decide whether the domestic political risks of handing the two men over outweigh the obvious international benefits.

The Libyan leader has been under increasing pressure from his allies in Africa and the Arab world to end the dispute.