In a memorandum for US Secretary of State Colin Powell, Bush acknowledged that Libya was in violation of a US law that would curtail such aid because Tripoli received technology meant to help it produce atomic weapons.

"I hereby determine and certify that the continued termination of assistance, as required by this section, would have a serious adverse effect on vital United States interests and that I have received reliable assurances that Libya will not acquire or develop nuclear weapons or assist other nations in doing so," the president wrote.

"It is in the national interest for the Export-Import Bank to guarantee, insure or extend credit or participate in the extension of credit in support of United States exports to Libya," he said in the statement, which the White House made public.

The United States hopes to wrap up, this month, ongoing talks that could effectively lead to declaring Libya free of weapons of mass destruction, a State Department official said September 1.

The official, speaking on condition of anonymity, said the United States hoped to tell Tripoli that it had a "reasonable degree of confidence" that Libya had met the commitment it made in December 2003 to dismantle its nuclear, chemical and biological warfare programs.

Bush lifted most sanctions against Libya in April and there is now a permanent US diplomatic presence in Tripoli for the first time since the early 1980s.

In May, Libya drew warm US praise when it announced it had decided to renounce all arms trade with states accused of weapons of mass destruction proliferation.

However, US sanctions related to Libya's alleged support for terrorist groups remain in place as the country remains designated as a "state sponsor of terrorism."

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