"I don't think the US will go to that extent of imposing sanctions because of this one small incident," Prime Minister Abdullah Ahmad Badawi told a news conference.

He was responding to a report in Newsweek magazine that Washington was contemplating sanctions after a company owned by his son was accused of manufacturing uranium-enrichment centrifuge parts for Libya.

A probe by Malaysian police has cleared the company, Scomi Precision Engineering (SCOPE), accepting its explanation that it did not know what the parts were for or that they were headed for Libya.

"There's a lot of cooperation between the US and Malaysia which is going on very, very well, which has brought benefits to both parties," Abdullah said.

"As far as the Malaysian government is concerned we are not doing something deliberately to harm friendly countries like the US. I think they can understand."

Asked whether Malaysia would allow US investigators to question the middleman in the deal, Sri Lankan businessman B.S.A. Tahir, Abdullah did not answer directly, saying: "Mr Tahir is a free man. He is not detained."

On whether there would be any further questioning of Tahir locally, he said: "It's a matter for the police. I'm not here to instruct them on what's to be done."

Tahir, who is married to a Malaysian and divides his time between his business interests here and in Dubai, has admitted to police that he acted as a middleman for the former head of Pakistan's nuclear programme Abdul Qadeer Khan, who has confessed to selling atomic secrets.

In a detailed insider's view of the proliferation scandal, Tahir told police Khan asked him to send centrifuges to Iran in 1994 or 1995, according to an official report which will be handed to the International Atomic Energy Agency.

Tahir also said Khan told him that an undisclosed amount of enriched uranium was sent by air from Pakistan to Libya around 2001.

"We checked and the police told me that he (Tahir) has not violated any regulations," Abdullah said. "What he did was entirely a business deal."

Tahir, 44, was named by US President George W. Bush as Khan's "chief financial officer and money launderer", but Washington has not called publicly for his arrest.

Khan, a disgraced one-time national hero credited with making Pakistan a nuclear power, has been pardoned by President Pervez Musharraf.

WAR.WIRE