March 28 (Bloomberg) -- The U.S. and Libya are close to resolving compensation claims related to 1980s terrorist attacks that are blocking full relations and deterring American investment in the oil-rich nation, U.S. officials and a victims' lawyer said.

The emerging deal would ensure that Libya wouldn't face any future U.S. claims over past terrorist attacks, a Bush administration official said in an interview. No dollar amounts have been discussed, and the U.S. may take weeks to make a judgment on the offer, according to the official, who asked not to be identified.

``I am optimistic that Libya will make a final payment to the Lockerbie families as part of an effort to globally resolve U.S. litigation soon,'' James Kreindler, the lead lawyer for the families of victims in the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland, said in a telephone interview.

U.S. companies are trying to compete for contracts in Libya to develop the North African country's oil and gas industries and other infrastructure projects. Libya, which holds Africa's largest oil reserves, wants to boost output to 3 million barrels of crude a day by 2013 from the current 1.78 million barrels.

A deal between the U.S. and Libya could entice U.S. businesses -- currently fearing risks to their reputations -- to invest in Libya by ensuring that future investments won't be seized if U.S. courts attach Libyan assets in rulings involving the victims.

Winning Compensation Sooner

``My sense of it is that Libya recognizes it's in its best interests to resolve the U.S. litigation and put all that behind it,'' Kreindler said.

David Welch, the U.S. assistant secretary of state for Near Eastern affairs, wrapped up two days of meetings in London this week with senior Libyan officials, including legal representatives, on a comprehensive settlement that offers the prospect of claimants winning compensation sooner than in American courts.

The U.S. briefed plaintiffs' lawyers on the proposed new Libyan deal even before Welch traveled to London, the official said.

The Lockerbie families are trying to recover the final payment of about $2 million for each victim that Libya had delayed. The total comes to about $536 million, Kreindler said.

Berlin Attack

American victims in another attack in 1986, on a Berlin nightclub, also have been seeking compensation in U.S. courts.

Libya ``has suggested a way to expedite resolution of these cases through a comprehensive settlement agreement,'' State Department spokesman Sean McCormack said yesterday. ``The administration is exploring this possibility with Libyan representatives to determine if it would help American victims receive fair compensation in the shortest possible time and with greater certainty.''

Ahmed Gebreel, a diplomat at the Libyan mission to the United Nations, said he had no details pertaining to the proposed deal. The Libyan mission in Washington didn't return a call seeking a comment.

Secretary of State Condoleezza Rice has delayed visiting Libya as she faces pressure from Congress and families of terrorism victims to withhold full relations until Libya pays full compensation for the 1980s attacks.

Lawsuits Allowed

A provision in a law, sponsored by Democratic Senator Frank Lautenberg of New Jersey and passed in January, allows victims of state-sponsored terror to sue countries that support and promote terrorism. The measure also allows these victims to seize hidden commercial assets for compensation if they win judgments in court.

The scope of the legislation has chilled U.S. business investment in Libya, the senior administration official said. Bush administration officials have petitioned Congress to allow for waivers to the law that would officially exempt Libya. The administration hopes a deal and payment of compensation to victims would lead to a reversal of the law's provisions.

The U.S. removed Libya from the list of state sponsors of terrorism in 2006.

Libyan leader Muammar Qaddafi is scheduled to address a conference on the country's relations with the West in Washington on March 31 by video link.

To contact the reporters on this story: Janine Zacharia in Washington at jzacharia@bloomberg.net; Viola Gienger in Washington at vgienger@bloomberg.net.

Last Updated: March 27, 2008 22:32 EDT