The White House said on Friday the decision allowed the  revival of economic ties with Libya and permitted US companies to undertake commercial, financial transactions and investments in the country.

White House spokesman Scott McClellan said the move would allow US companies to "buy or invest in Libyan oil and products", adding it was prompted by Libya's decision to eliminate weapons of mass destruction programme and cease supporting terrorism.

The decision to ease economic embargo on Libya also involves dropping United States' rejection to Libyan request for membership in World Trade Organisation as well as opening trade with Tripoli.

Military exports to Libya will not be authorised, however; nor will air services between the two countries be resumed, or Libya's frozen assets in the US released.

The State Department has said it intends to establish a US liaison office in Tripoli pending congressional notification.

Improving image

Ordinary Libyans said on Friday the US move to end most sanctions would spur on the long-isolated economy and should improve the international image of a country long viewed by Washington and others as a pariah.

"It is a good change for the Libyans and for the Americans. If you have a good relations with the Americans and Britain then others will have a better view of you. It will open up the world to us," said 54-year-old teacher Ali Zalit Muhi al-Din.

"Hopefully the West will change their view of Libyans and see that Libyans are not terrorists," he said.

The UN embargo was lifted after Libya took responsibility for the 1988 Pan Am airliner bombing over Lockerbie, Scotland, and agreed to a $2.7 billion compensation package.