British negotiators with Libya decided they were unlikely to succeed in a bid for compensation for Colonel Gaddafi-sponsored IRA terrorism, a former foreign secretary has said.
The dictator's regime would have insisted republican atrocities like the Old Bailey bombing were not their direct responsibility, Jack Straw added.
Victims of IRA attacks using Libyan Semtex are pressing for UK Government support in their campaign for compensation from massive amounts of frozen assets seized from the toppled administration.
Mr Straw said the North Africans had accepted culpability for the Lockerbie plane bombing and the shooting dead of WPc Yvonne Fletcher outside the Libyan embassy in 1984.
He said: "They were directly responsible for those acts of terrorism.
"If you went to a British court on this issue and sought to argue liability for those two sets of matters and liability in respect of PIRA terrorism, you would have greater difficulty if the Libyans were to resist, as I suspect they would, in showing that there was a clear chain of causation between the supply of terrorism and the actual injuries and deaths which resulted.
"That was the difficulty, that was what the Libyans were resisting, and that is why a judgment had been made, an overall judgment had been made that we were not going to get very far pursuing that."
While the US, France and Germany negotiated multimillion-pound settlements with Muammar Gaddafi for its citizens impacted by Libyan-directed terrorism, the previous Labour government in the UK has been heavily criticised for not striking a similar deal.
Mr Straw gave evidence to the Northern Ireland Affairs Committee of MPs at Westminster which is investigating the matter.
He served as foreign secretary from 2001-06 and helped secure a 2003 deal for Gaddafi to give up his weapons of mass destruction programmes.
He told the committee: "The Libyans had accepted wholly their responsibility for the Lockerbie bombing as they had for the killing of WPc Fletcher.
"Although they admitted they had supplied the Semtex, there was no parallel acceptance of responsibility, and still less an acceptance by them of the case for compensation for those victims. That was their responsibility."
Kate Hoey, a Labour backbencher, asked why the deaths of 3,500 victims of Libyan Semtex were deemed less important to the British government.
Mr Straw said that was an outrageous suggestion.
He said: "This issue was never swept aside. Mr Blair devoted the 10 years that he was prime minister to securing peace in Northern Ireland."
Mr Straw said compensation for IRA terrorism was never raised with him.
He said: "Negotiators were trying to remove a serious palpable threat from Libya to the rest of the world.
"Our focus was absolutely on getting the Libyans to admit to these holdings, to get inspectors in and have all the chemical weapons and nuclear facilities dismantled and made safe under international supervision."
He added: "Had we refused an agreement on the weapons of mass destruction agenda with the Libyans, all that would have happened is it would not have helped the victims of IRA bombings for a second, not remotely, it simply would have meant that Libya continued to be dangerous."