"As Libya's policy changes, Libya's behaviour changes, Libya's circumstances change, we'll be willing to look at those things," said State Department spokesman Richard Boucher.

"At some point, we may be in a position to make some changes."

Libya's economy has suffered a severe blow from US economic sanctions and a trade and travel ban imposed during the Reagan administration.

US officials have said they would have to see concrete proof that Libya has renounced nuclear weapons, and support for terrorism before all sanctions are removed.

"Terrorism is a different issue that has to do with, I'd say largely the residual contacts and support that they might have had for terrorist groups," Boucher said.

"Each of those issues would be looked at on their merits, but we're willing to look at them as the circumstances change."

Boucher also said that Washington was not yet ready to lift a ban on Americans travelling to Libya, imposed in 1981 and reissued for a year last month.

"In terms of the use of US passports, obviously the question is the safety and security of American citizens who might be considering travel there.

"To the extent that Libya is taking these steps to ease tensions and to lower the tensions that might exist for Americans, that may contribute to a review of the passport ban.

"We renewed it recently, but said it could be reviewed and changed at any time."

The United Nations suspended sanctions against Tripoli in 1995, but did not fully lift them until September when Libya admitted its role in bombing of a US airliner over Lockerbie, Scotland in December, 1988, which killed 270 people, and began to pay compensation.

AP adds: The head of the UN atomic watchdog agency said Monday he will lead the first inspection of Libya's nuclear facilities as soon as next week, aiming to kick-start the elimination of the country's programs for weapons of mass destruction. Libyan leader Muammar Gaddafi said he had nothing to hide. "Come and see what it is, we don't want to hide anything," he told CNN.

Speaking of other nations with nuclear weapons, Gaddafi said they should also open themselves to inspections.

"In my opinion they should follow the steps, or take the example of Libya, so that they prevent any tragedy from (being) inflicted on their people," he said.