Libya (search) has agreed to halt military trade with North Korea, Syria and Iran.

The move, announced Thursday by Undersecretary of State John R. Bolton, follows a decision by Tripoli to stop its programs to develop weapons of mass destruction. It was hailed as welcome news by Bolton, who said North Korea (search) had provided Libya with its Scud missiles (search).

All three countries, especially North Korea, are "of very great proliferation concern" and Libya's renunciation of military relations with them is an important step forward, Bolton said.

He said Libya also would announce shortly a promise to renounce trade in missile and missile-related equipment with countries that do not subscribe to international control of missiles.

While Bolton said "we are satisfied with the progress we have made" with Libya on weapons sytems, he said some aspects of the North African country's chemical weapons program still need to be eliminated and the retention of some Scud missiles remains an issue.

In Tripoli, the Libyan foreign ministry formally announced "it will not deal with any products or military services with countries it considers as a source for weapons of mass destruction."

The move is in line with a decision by Libyan leader Moammar Al-Qaddafi (search) to steer the country toward the good graces of the United States and the West by abandoning major weapons programs.

Last month President Bush took steps to restore normal trade and investment ties with Libya, moving to allow resumption of oil imports and most commercial and financial activities as a reward to Qaddafi for eliminating his most destructive weapons.

Libya's actions "have made our country and the world safer," the White House said. But significant sanctions remain on the books as an inducement to Libya to resolve issues that are still pending.

In an extraordinary move, Qaddafi agreed last December to dismantle Libya's biological, chemical and nuclear weapons programs.

In response, the administration two months ago lifted a ban on use of American passports to travel to Libya.

"Through its actions, Libya has set a standard that we hope other nations will emulate in rejecting weapons of mass destruction (search) and in working constructively with international organizations to halt the proliferation of the world's most dangerous systems," White House press secretary Scott McClellan said.

Last year, Libya removed a major obstacle to more normal relations with the United States by meeting U.S. demands stemming from the bombing of Pan Am flight 103 (search) in 1988. Libya accepted responsibility for the bombing and promised to pay $10 million in compensation to each family of the 270 victims.

In addition to the economic steps the White House announced, fledgling diplomatic ties will be upgraded to permit the opening of liaison offices in Washington and Tripoli. This would be a prelude to the eventual establishment of normal diplomatic relations.

The easing of sanctions imposed in 1986 and those called for under a 1996 Libya sanctions law will allow a resumption of oil imports from Libya and permit most commercial activities, financial transactions and investments.