After a change in policy in London and Washington earlier this year, the UN decided sanctions against Libya could be suspended if the two men were handed over for trial in the Netherlands rather than Scotland or the US as originally demanded.

The bomb killed 270 people

Kofi Annan told reporters he hoped to bring the issue to a close by the end of this month.

He said he would be in North Africa next week and that a visit to Libya had not been excluded.

His comments follow weeks of discussions between Libyan and UN lawyers over the legal details of any trial for the two men - Abdel Baset al-Megrahi and Al-Amin Khalifah Fhimah - alleged to be behind the bombing that killed 270 people in 1988.

The Libyans have been concerned about precisely where in the Netherlands the trial would take place and where the two would serve their sentences if found guilty.

Diplomatic sources in New York say the legal issues are less important than the fundamental political decisions that ultimately rest with the Libyan leader, Colonel Gaddafi.

They say he must decide whether the domestic political risks of handing the two men over outweigh the obvious international benefits.

The Libyan leader has been under increasing pressure from his allies in Africa and the Arab world to end the dispute. Our UN Correspondent Rob Watson says a personal visit by Mr Annan may provide the perfect opportunity to do just that.

Top security chiefs 'jailed'

At the same time, there have been reports that three senior Libyan officials have been tried and jailed in Tripoli in connection with the bombing.

But exiles in London say this is an attempt by the Libyan authorities to prevent key witnesses testifying in any trial of the two men wanted by the US and UK.

The exiles argue that if the officials - who are all stalwarts of Colonel Gaddafi's government and include his closest associates - are already behind bars, they will be unable to be called as witnesses.

Alternatively, the exiles say the convictions could be used to show London and Washington that Tripoli has taken its own steps to address the Lockerbie case.

According to the exiles, the three security officials - Abdullah al-Senussi, Musa Koussa and Muhammad al-Misrati - were convicted of dereliction of duty and sentenced to between five and seven years in prison.

There has been no confirmation from Libya, but Libyan Justice Minister Muhammad al-Zuwiy did not deny the trials took place.