UNITED NATIONS/OSLO (Reuters) -A spat between the United States and Norway over the Nordic country's wealth fund's divestment from U.S. construction equipment-maker Caterpillar appears to be coming to an end, Norwegian Foreign Minister Espen Barth Eide said.

Washington and Oslo have been at odds over the decision by Norway's $2 trillion sovereign fund, the world's largest, to divest in August from Caterpillar due to the company's supply to Israel of bulldozers used in Gaza and the occupied West Bank. 

The U.S. State Department said in September it was "very troubled" by the move. Trump ally and Republican U.S. Senator Lindsey Graham had suggested the U.S. should impose tariffs and visa revocations in retaliation.

Since then, the situation appears to have improved, according to Norway's foreign minister.

"They have expressed their discomfort with this and then we have explained that this is something that is not on the government agenda as such," Barth Eide said in an interview on the sidelines of the United Nations General Assembly. "I believe that's settling that particular case."

He did not give more specifics.

Norway has said the government had not taken the decision to divest from Caterpillar. Instead, it was taken by the board of the central bank, upon recommendation from the fund's ethics watchdog, as per guidelines decided by parliament. 

The fund's ethics watchdog has said that, in its assessment, Caterpillar's products such as bulldozers were being used by Israeli authorities "to commit extensive and systematic violations of international humanitarian law" such as the "widespread unlawful destruction of Palestinian property".

The watchdog said Caterpillar has "not implemented any measures to pre­vent such use".

Caterpillar has not responded to requests for comment. Israel's embassy in Oslo declined to comment at the time.

The fund had sold its entire holding in Caterpillar by the time it said it had divested from the company. It held a 1.17% stake worth $2.1 billion on June 30, according to fund data.