Several people were being questioned by the RUC last night following the murder of reputed UVF commander Mr Richard Jameson, which has raised fears of a deadly inter-loyalist paramilitary feud.
Sources from the UVF and its political wing, the Progressive Unionist Party, last night blamed the Loyalist Volunteer Force (LVF) for the murder of Mr Jameson, who on Monday night was shot outside his home on the Derrylettiff Road, near Portadown, Co Armagh.
If it is proved that the LVF was involved, it could affect its early-prisoner releases. Should the UVF retaliate, as sources say it is planning to do, its ceasefire could be viewed as broken.
This could also jeopardise releases of UVF prisoners and place pressure on the PUP in the Assembly - although it is understood the PUP could not be expelled from the body.
In the event of retaliatory bloodletting, it is unlikely there would be any imminent move on UVF decommissioning, which in turn could prevent the IRA from engaging in some form of disarmament.
PUP Assembly member Mr Billy Hutchinson said Mr Jameson (46), a married father of three children, was murdered by LVF members involved in the drugs trade.
Loyalists linked to the LVF were in a state of high alert last night for fear of reprisals by the UVF. The RUC said it was stepping up its presence in the Portadown area. Sources close to the UVF predicted that because Mr Jameson was such a senior loyalist, swift and severe retaliation was inevitable.
It is understood that this killing is directly related to a brawl in the bar of Portadown Football Social Club on December 27th involving UVF and LVF members, during which Mr Jameson and 11 others were injured.
Mark Fulton, a close associate of the murdered LVF leader Billy Wright, who is serving time in the Maze on firearms offences, yesterday urged the two organisations to step back from any further action. However, one UVF associate warned that senior LVF figures would be "wiped out".
The North's First Minister, Mr David Trimble, the Northern Secretary, Mr Peter Mandelson, and other political and church figures appealed for calm and no retaliation yesterday.
