By Mark Trevelyan, Security Correspondent

STUTTGART, Germany, Oct 15 (Reuters) The United States is keen to add Libya to a group of nine north and west African nations with which it is working closely to deny al Qaeda a sanctuary in the region, senior US military officials say.

They are concerned that a local Islamist network, the Libyan Islamic Fighting Group (LIFG), is building up its strength both domestically and in Europe, as well as helping to funnel militants to join the insurgency in Iraq.

While the US military does exchange some intelligence with Libya, the security relationship is constrained by the gradual pace of political rapprochement between Washington and a country it regarded until recently as a rogue state.

That has so far prevented Libya from joining the Trans-Sahara Counter-Terrorism Partnership (TSCTP), a group linking the United States and nine countries ranging from regional military power Algeria to impoverished Mali and Niger.

''We have nine countries in this Trans-Sahara programme, we'd love to make them (Libya) number 10,'' said a senior official at U.S. European Command in Germany, which despite its name is also responsible for military ties with most of Africa.

''They'll be a unique partner. ... We're eager to play with them.'' Libya began to end decades of international isolation by accepting responsibility for acts like the 1988 bombing of a U.S. airliner over Lockerbie, Scotland and announcing in December 2003 it was renouncing weapons of mass destruction.

But it was only this year that the United States restored diplomatic relations and ceased to label Libya a state sponsor of terrorism. It has yet to send an ambassador to Tripoli, and Secretary of State Condoleezza Rice said last month that Libya had yet to resolve some compensation issues over Lockerbie.

ISLAMIST GROUP Meanwhile, the EUCOM official said, there is increasing concern about the activities of the militant LIFG, even though it has yet to pull off major attacks.

''The danger of the Libyan Islamic Fighting Group to me is in their support infrastructure in Europe. These are some of the best counterfeiters, passport and visa forgers in the world,'' he said.

''The other problem that we're seeing ... is they're facilitating the foreign fighter flow to Iraq. Probably not large numbers, but significant enough.'' The official said Libyan leader Muammar Gaddafi ''probably couldn't care less if they left Libya to go (to Iraq), but he doesn't want them coming back as experienced mujahideen attacking him''.

In an interview with Reuters, EUCOM deputy commander General William ''Kip'' Ward declined to speculate on when Libya might join the TSCTP but said ''we would look to be as inclusive as we could be'' in expanding the group.

U.S. military officials see northern and west Africa, with its vast areas of unpatrolled desert, as a natural magnet for al Qaeda. They expect its importance to increase, regardless of the outcome of the insurgency in Iraq.

''One way or another, they're going to North Africa. If they win (in Iraq), they spread there. If they lose, they reposition,'' another senior EUCOM official said.

Eventual entry to the TSCTP would draw Libya closer to the United States and to its regional neighbours, including through regular security consultations and joint exercises. But past hostility towards Washington will not vanish overnight.

''They're very sensitive about a US presence,'' the first official said. ''They haven't fallen in love with the West, and certainly not with Uncle Sam.'' REUTERS SY HT1518