U.S. Urges Allies to Isolate Libya Over Pan Am Case : Terrorism: White House brushes aside Tripoli’s proposal to let the World Court handle the bombing charges.

WASHINGTON —  Brushing aside Libya’s proposal to litigate the case of Pan American Flight 103 in the World Court, the Bush Administration sought Friday to enlist at least 20 other countries in a broad international effort to isolate Moammar Kadafi’s regime economically, politically and diplomatically.

“Our intention is to work with the allies on a concerted response,” White House Press Secretary Marlin Fitzwater said. “Many other countries are interested and . . . want to have a role of some kind.”

An indictment in both the United States and Scotland of two Libyan intelligence agents has focused attention on the Kadafi regime in the Dec. 21, 1988, bombing of the Pan Am jet over Lockerbie, Scotland, that killed 259 passengers and crew members and 11 people on the ground. U.S. officials said it is inconceivable that the attack could have been carried out without the participation of high-level Libyan officials, possibly including Kadafi.

A White House official said the Administration has not ruled out military action against Libya, although the focus now is almost exclusively on possible economic sanctions.

Washington will need help in isolating the Libyan economy because the United States broke nearly all its own economic relations with Libya more than five years ago. One official said the Administration is discussing the possible embargo with 20 to 25 nations, most of them countries that regularly buy Libya’s high-quality crude oil.

In 1986, the Ronald Reagan Administration, accusing Libya of involvement in terrorism, ordered U.S. oil companies to sever their relations with Libya and to withdraw all American technicians. It also prohibited American companies from buying Libyan oil or selling oil-field equipment, including spare parts, to the Libyan regime.

But on Jan. 20, 1989, just hours before leaving office, Reagan signed an executive order permitting U.S. firms to resume dealings with Libya through wholly owned foreign subsidiaries. Libya rejected that step at the time, insisting that it would resume conducting business with American-owned companies only if all the sanctions were lifted. The Libyan government has indicated recently, however, that it is ready to abide by U.S. conditions.

The Bush Administration presumably could close the loophole and restore a total ban. In the past, sanctions against Libya have foundered because its oil is of such high quality that customers are willing to evade embargoes to get it. This time, though, the United States, Britain and France appear ready to act, and that group could form a substantial nucleus for economic action.

France earlier accused Libya of bombing a French jetliner that crashed over the Sahara in September, 1989, killing 170 people.

“We know enough to say there is a (Libyan) responsibility and that will lead to a certain number of consequences,” French President Francois Mitterrand said Friday at a news conference in Bonn.

Libya denied it was involved in either plane bombing and said it will refuse to hand over the intelligence operatives named in the U.S. and Scottish indictments--Abdel Basset Ali Megrahi and Lamen Khalifa Fhimah. For its part, the Bush Administration said it will continue to seek to punish Libya as a nation even if the two men are apprehended and convicted.

“The goal is to get Libya out of the terrorism business,” one State Department official said. “Libya is not going to evade responsibility for continuing support of terrorism (even) if they decide to scapegoat a couple of guys or hang them out to dry.”

There is no extradition treaty between the United States and Libya, but Justice Department sources said U.S. agents are authorized to seize fugitives overseas without the host country’s permission.

In a subdued official response, the Libyan government suggested turning the whole matter over to the World Court, a tribunal that usually adjudicates boundary disputes and commercial claims.

“We urge the United States of America and Britain to resort to the logic of law, wisdom and reason by referring the matter to neutral international committees of inquiry or to the International Court of Justice,” the Libyan statement said, referring to the World Court by its formal name.

State Department spokesman Richard Boucher accused Libya of stalling.

“We reject the idea,” Boucher said. “It’s not a matter for international arbitration of some kind. The murder of U.S. citizens is properly a matter for the investigation and the adjudication by U.S. courts.”

“Why should I extradite my own people to a different country?” Saeed Mujbar, Libya’s ambassador to France, asked during an interview on NBC’s “Today” show. “This is a matter of sovereignty, and this is a matter of legal procedures.”

Times staff writers Ronald J. Ostrow, Douglas Jehl, Doyle McManus and Stanley Meisler contributed to this report.