Libya paying terror victims

Begins deposits to $2 billion fund

WASHINGTON - Libya has started making payments into a nearly $2 billion fund to compensate the families of American victims of Libyan-linked terror attacks in the 1980s, another step in the full normalization of long-strained ties between Washington and Tripoli, the State Department said yesterday.

The "substantial amount" deposited overnight Wednesday into a US government account is not the full amount needed to fulfill a compensation agreement reached earlier this year, but officials said it demonstrated Libya's willingness to resolve outstanding claims over the 1988 Pan Am 103 bombing over Lockerbie, Scotland and the 1986 bombing of a German disco.

The agreement calls for the creation of a $1.8 billion fund: $1.3 billion for those attacks and the 1989 bombing of a French airliner, and $500 million to Libyan victims of US airstrikes ordered in retaliation for the disco bombing.

The Bush administration has vowed that no American taxpayer money will be used for the US portion but has not said where the money will come from.

David Welch, the top US diplomat for the Middle East who negotiated the deal, said the Libyan deposit "is a promising development" and a sign of Libya's "commitment to fully implementing the claims settlement agreement."

He would not discuss the amount of what he termed a "down payment" to the fund or whether it was made by the Libyan government or private entities.

But he said that he was hopeful that the remaining amount would be deposited soon, even amid the global economic crisis.

"Given the economic climate, it could be a bit of challenge," Welch said in a conference call. Under the agreement, the Bush administration pledged to restore the Libyan government's immunity from terror-related lawsuits and dismiss pending cases, but officials stressed that it is not obligated to do so until the full compensation is paid.

In addition, payments will not be made to victims or their families until the fund hits $1.8 billion.

The payment was received just days after the opening of a US trade office in Libya's capital and a historic visit there last month by Secretary of State Condoleezza Rice, who was the highest-ranking US official to visit the country in more than 50 years.

The deposit had been expected in early September but was inexplicably delayed, angering some in Congress who have thus far refused to lift holds on the nomination of a new US ambassador to Libya and funds for a new US embassy in Tripoli.

US-Libyan relations hit a low point in the 1980s but began to improve after Libyan leader Moammar Gadhafi - whom President Reagan called the "mad dog of the Middle East" - renounced weapons of mass destruction and terrorism in 2003.

The rapprochement stalled after Libya halted payments to the families of Lockerbie victims under a previous compensation deal that would have paid $8 million to each and in the absence of an agreement on the La Belle disco bombing in Berlin.

But it picked up again in August when Libya and the United States agreed to a new, comprehensive package that would cover compensation for all 1980s-era claims.

All 269 passengers and crew, including 180 Americans, on the Pan Am flight and 11 people on the ground were killed in the Lockerbie bombing.

Three people, including two American soldiers, were killed and 230 wounded in the Berlin disco attack.

That attack prompted Reagan to order airstrikes on targets in Tripoli and Benghazi that Libyans say killed 41 people.