American oil companies whose facilities were nationalized by Libya in the mid-1970s have been secretly negotiating with senior oil officials there for months to work out a compensation package, according to Persian Gulf regional diplomats in contact with these firms and a European cabinet minister who was in Washington recently.

The talks began in mid-2003, about six months before the international rehabilitation of the government of Moammar Gaddafi and the lifting of U.S. sanctions. Gaddafi has been recasting himself as a global team player in an effort to shed his image as the revolutionary and Arab nationalist who took over petroleum production.

"There have been and there still are some visits on an exploratory basis by these oil companies," said John Dalli, Malta's minister of foreign affairs and investment promotion, who has handled Libyan affairs for his government for 16 years.

"The agreement for nationalization originally speculated there would be a sort of compensation package. Even at that time, it indicated that assets will not be totally lost," he said in an interview Thursday. "What they will be negotiating now are the technicalities of the formula," added Dalli, who was in town last week for a meeting with Secretary of State Colin L. Powell.

Dalli said Libya's change of heart not only stems from geopolitical changes in the region and Gaddafi's disaffection with the Arab League and the Organization of African States. It also grows from rising expectations at home and new public contact with the outside world through the Internet revolution. "In a rich country like Libya, people's aspirations are growing. They want to live a normal life," said Dalli, a former finance minister.

In recent years, Western companies have expressed new interest in tapping Libya's consumer market and updating its oil industry's infrastructure. Gaddafi's resistance even to modest free-market reforms in the past few years had constrained foreign investment, but that may change now.

The Libyans are insisting that foreign companies doing business in Libya "come in as partners and not as traders," added Dalli.

Malta managed to maintain cordial ties with Libya while honoring the U.N.-imposed sanctions of 1992-2000. Now, Dalli said, Malta is hoping to find a niche for itself in mid-level management and services operations of Libya's oil industry.

"Malta can act as a facilitator for companies or individuals hoping to do business in Libya," he said. "We know the terrain and can act as very good scouts."

'Multilateral Hell'

Who said America doesn't know how to succeed in dramatic transformations of warring societies and in democratic nation-building? All it has to do is go back to its old recipes.

A two-volume study just published by the German Historical Institute documents one of U.S. foreign policy's shining moments: "Never before has America expended so many resources to remake a foreign and occupied nation in its own political, social and cultural image," said German Ambassador Wolfgang Ischinger, reading last Wednesday evening from the study by a Heidelberg University professor.

Then Ischinger gave his own thoughts on the study's subject, the events in his own country after 1945: "These volumes explain that America knows how to transform a defeated nation into a friend. . . . America knows how to promote the rule of law, and human rights."

The ambassador spoke at a high-wattage gathering of European ambassadors and former officials invited to honor Strobe Talbott, deputy secretary of state in the Clinton years, at the German ambassador's residence on Foxhall Road.

Ischinger presented Talbott with a copy of the study after decorating him with one of the highest ranks of Germany's Knight Commander's Cross of the Order of Merit, for diplomatic vision in defining a common Western approach to the Kosovo crisis.

The German ambassador described Talbott's energetic shuttle diplomacy with the Russians, the Finns, the French and others, which led to the adoption of a U.N. Security Council resolution and the 1999 deployment of peacekeeping forces in Kosovo.

"Was this easy? No. Were the Europeans troublesome partners for Washington? Was war by committee giving American leaders multiple headaches? You bet. . . . But what really mattered was that you, Strobe, created an atmosphere where everybody had a stake in the mission's success," Ischinger said.

"Yes, we did find you troublesome . . . your many committees and mysterious rites," quipped Talbott about what he called his foray into "multilateral hell." To commemorate the occasion, Talbott coined a very lengthy term in the ambassador's native tongue to express how the United States is viewed on the continent: "meist unumgehbare manchmal unausstehbare alleingebliebene Supermacht," German for "mostly indispensable, but sometimes insufferable, sole remaining superpower."