* Libya yesterday rejected new Western demands to surrender two suspects in the 1988 bombing of Pan Am Flight 103, saying it was astonished at a deadline set by the United States, Britain, and France.

The three Western powers have pledged to push for stronger sanctions against Libya unless it surrenders the suspects by Oct. 1.

The wider sanctions would freeze Libyan assets overseas and block sales of equipment to Libya's oil industry, its economic mainstay.

"It is astonishing that the three Western powers should give in their statement only a few weeks to solve a problem of this magnitude which they themselves admit took long years of investigation," said a Foreign Ministry statement carried by Libya's JANA news agency and monitored by the British Broadcasting Corporation in London.

The statement added, however, that Libya was ready to negotiate turning over the suspects for a "just and honest" trial and urged UN Secretary-General Boutros Boutros-Ghali to arrange such talks.

Essentially, the statement repeats Libyan leader Col. Muammar Qaddafi's stand that his government would surrender the two men for trial somewhere other than the United States or Britain. The two Western nations reject that.

The statement said Libya agreed that "those who are suspects must be brought to trial" and said it was ready to negotiate with "the parties involved" over a trial venue.

US and British officials want to try the two Libyans in the Pan Am bombing over Lockerbie, Scotland, that killed 270 people in 1988. France is demanding Libyan cooperation in its investigation into the bombing of a UTA airliner over Niger in 1989 that killed 170 people.

On Friday, the UN Security Council renewed for another 120 days sanctions that block international air travel to and from Libya, prohibit arms sales, and limit diplomatic contacts with the North African nation. The sanctions were first imposed in April 1992.

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