"Libya was on the point of building a nuclear bomb: that is no longer a secret," Kadhafi was quoted on Monday as telling a group of engineers. "The Americans and the International Atomic Energy Agency were well aware."

In a dramatic move that has seen his former pariah state returned to the international fold, Kadhafi announced in December 2003 that Libya was abandoning plans to build weapons of mass destruction.

Kadhafi, whose support for revolutionary causes led to his country being ostracised by the West for more than two decades, and fingered by Washington as a terrorist state, acknowledged that his hopes of building a pan-Arab nation had been illusory.

"We spent a lot of money on military projects but not on civilian projects and reconstruction; our hopes on setting up an Arab nation were immense but unfortunately all failed," he said, recalling that Libya had supported liberation movements in Africa, America and Asia, and the Irish Republican Army (IRA).

"This support was indispensable at that time. It was in the name of Arab nationalism, socialism and revolution. Now all that has changed and we have paid dearly for it," Kadhafi said.

Since Kadhafi's surprise 2003 announcement, a string of Western leaders have visited the north African country, with many eyeing its under-developed potential oil wealth.

The lifting of US economic sanctions on Libya opened a new era in relations -- especially since the Libyan government selected US oil companies Occidental, Chevron and Amerada Hess in January 2005 to prospect for Libyan oil and modernize its oil facilities. Libya has Africa's biggest oil reserves.

Last week, in another commercial deal with the West, Afriqiyah Airways of Libya signed a preliminary agreement to buy 12 Airbus planes for an estimated one billion dollars, with the option to purchase eight further aircraft, Airbus said.

Washington severed ties with Libya in 1981 and began imposing sanctions, two years after radical students ransacked the US embassy in Tripoli.

An alleged Libyan-backed attack on a Berlin disco popular with Americans in 1986 spurred the United States to launch air raids against Tripoli, killing 41 people.

Libya in 2003 accepted responsibility for the bombing of a US Pan Am jet over Lockerbie, Scotland in 1988 that killed 270 people, and agreed to pay families of victims 10 million dollars each in compensation.

Last May, Washington renewed diplomatic ties with Tripoli and formally removed Libya from a US list of states it says sponsor terrorism. It followed this in July by saying it had lifted sanctions on Libyan air transport.

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