Britain has asked the Security Council to quickly end UN sanctions on Libya.
But France says the North African state could not turn the page on the 1988 Lockerbie bombing until it offered more money for victims of a 1989 attack on a French airliner.
British Ambassador Emyr Jones Parry introduced a draft resolution to lift the sanctions imposed on Libya after the midair bombing of Pan Am Flight 103 over Scotland, and the council agreed to begin debate on Wednesday.
"Our wish is to see an early vote. This has been a long, painful, protracted negotiation, and especially for the families," Mr Jones Parry told reporters.
France, which has veto power in the 15-nation Security Council, said the sanctions could not be lifted until its own demands on the Tripoli government were resolved.
French Deputy UN Ambassador Michel Duclos told a closed-door council meeting Paris was "not prepared to compromise," diplomats said.
In a deal painstakingly negotiated with Britain and the United States, Libya on Friday accepted responsibility for the Pan Am bombing and agreed to pay an expected $2.7 billion in compensation - enough to provide up to $10 million to the families of each of the 270 people killed in the attack.
That prompted a last-minute drive by Paris to pressure Libya for more money for the 170 victims of the September 1989 downing of a jet from the now-defunct UTA French airline over the West African state of Niger.
A Paris court found six Libyans guilty in absentia for the UTA bombing. Libya never officially accepted blame but paid some €30.5 million euros in compensation, leading to payouts of at most $33,780 per victim, according to a group representing the victims' families.
Council diplomats said a vote on the British text could not be scheduled in any case until Libya put the Lockerbie money into a special escrow account, a step that could come as early as today.
France's foreign ministry said it was making "important progress" in talks with Libya on the UTA victims, 65 of whom were French. But it would not say if it would use its veto.