About a dozen customers escaped unhurt from the blast at the Derryhirk Inn, near Craigavon, County Armagh.

In a coded statement, loyalist paramilitary group the Orange Volunteers, claimed responsibility.

The grenade-type device bounced off a wall and exploded at 2230GMT on Wednesday, damaging a Mercedes car parked outside.

Customers were left badly shaken, according to pub owner Patsy Mulholland.

"It was one hell of a blast. It came without any warning and there was some panic," he said.

"Customers were wondering what was going on. We phoned the police and they told us to stay where we were and not to go outside."

Scene of RUC operation

The bar attacked was the scene of a controversial RUC undercover security operation in March 1997.

Armed officers burst in, terrifying dozens of customers who feared they were going to be killed by loyalists.

Earlier this year, the Director of Public Prosecutions decided not to prosecute any of the officers involved.

Unionists call to block Sinn Fein

Earlier on Wednesday a unionist coalition challenged Northern Ireland First Minister David Trimble to back an attempt to stop Sinn Fein taking ministerial posts in the Northern Ireland executive.

David Trimble is being urged to sign the petition

The alliance of assembly members wants to exclude the republican party if the IRA does not begin decommissioning.

Members of the Democratic Unionist Party (DUP) joined UK Unionists, Northern Ireland Unionists and United Unionists in a petition to force an assembly debate on the subject.

UK Unionist leader Bob McCartney said 29 assembly members had signed the demand, which needs the support of 30 to be acted on.

One member of Mr Trimble's Ulster Unionist Party (UUP), Peter Weir, has so far given his support.

DUP deputy leader Peter Robinson invited the First Minister and other UUP members to join Mr Weir.

"We will invite them one by one if necessary, but their electorate should know if they are willing or otherwise to sign the motion to exclude Sinn Fein," he said.

Mr McCartney said they were calling in a pledge made by the UUP "that the decommissioning issue is the crunch issue".

'Opportunism'

But senior UUP assembly member Michael McGimpsey attacked the move as "opportunism".

The handover of arms has proved a tough sticking point

"We have always said that we would try to exclude Sinn Fein from the executive if decommissioning did not occur," he insisted.

"Mr Robinson knew that and he is merely stealing our clothes."

Sinn Fein national chairperson Mitchel McLaughlin said the unionists were trying to delay the inevitable.

"They know in advance it will not succeed," he said. "They should really get down to the business of forming the executive."

Northern Ireland Secretary Mo Mowlam has set a deadline of next week for the transfer of powers.