Libya puts "substantial" money in fund

Libya has deposited a "substantial" sum of money into a $1.8 billion fund for victims of terrorism but payments can be made only when Tripoli gives the remaining agreed amount, the United States said on Thursday.

Assistant Secretary of State David Welch said Libya put the money overnight into a U.S. account for the fund, which was agreed on in August by the United States and Libya to settle terrorism claims on both sides from the 1980s.

Settling the issue of terrorism claims is a key factor in improving ties between the two former foes, which first began warming after Libya gave up its weapons of mass destruction program in 2003.

Of the $1.8 billion expected ultimately to go into the joint fund, about $1.5 billion is earmarked for U.S. victims' families and the remainder for Libyans, Welch said in a conference call with reporters.

"We have received a substantial amount of money in the U.S. government account established for American claimants. This is a direct deposit that was just made overnight," said Welch.

"We deem this to be evidence of them fully implementing the whole agreement," he said.

American victims covered by the fund include those who died in the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland, which killed 270 people, and the 1986 attack on a West Berlin disco that killed three people and wounded 229.

It also provides compensation for Libyans killed in 1986 when U.S. planes bombed Tripoli and Benghazi in retaliation for the disco attack. Forty people died, including Libyan leader Muammar Gaddafi's adopted baby daughter.

Welch said part of the reason for not revealing the amount of money deposited so far was to avoid provoking "anxiety or infighting" among victims' families pursuing claims.

The dispatch of a U.S. ambassador to Libya had been delayed by lawmakers until Tripoli put money into the fund. It was unclear whether the infusion of funds would clear the way for ambassador Gene Cretz to go take up his post.

IMPROVED TIES

Agreement on creating the fund paved the way for U.S. Secretary of State Condoleezza Rice to go to Libya last month -- the first visit by a top U.S. diplomat in half a century and a tangible sign of improved ties.

Earlier this week, the U.S. Commerce Department opened a trade office in Libya as a further sign of better business and diplomatic ties.

Welch said the United States would continue to work with Libya to quickly get the remaining agreed funds to compensate victims' families.

"You may have noticed it is a little difficult to raise money these days and it may take some more time, but I am optimistic this will be done ... expeditiously," said Welch.

Money can be paid out to families once Libya's immunity has been granted from court cases and this can happen only when Rice has certified to Congress that the necessary funds have been received to cover outstanding settlement claims.

"Until the claims settlement agreement is fully implemented the U.S. is under no obligation to restore Libya's immunities, or dismiss claims in U.S. courts," said a senior U.S. official, who spoke on condition of anonymity.

Libya has in recent weeks approached foreign companies, including U.S. firms, as well as Libyan entities, to ask them to make donations into the fund, said Welch.

"I don't know whether any of those non-American or Libyan companies have contributed but I don't believe any American companies have," said Welch, adding that Washington had made it clear to Libya it must not pressure U.S. firms.

"We have said that participation into a fund of this sort must be voluntary and therefore we would not pressure American companies to do something they don't want to do," he said.