Libya Is Off U.S. Terrorist List

After spending more than a quarter-century on the United States' State Sponsor of Terrorism list, Libya has finally completed its journey back into the relative good graces of the U.S. government.

The State Department announced today that it would remove Libya from the list in 45 days as part of a three-pronged process of normalizing U.S.-Libyan relations, declaring that Libya was "out of the terrorism business."

In a statement announcing the restoration of full diplomatic relations, Secretary of State Condoleezza Rice said Libya was being rewarded for its "renunciation of terrorism and the excellent cooperation Libya has provided to the United States" in the war on terror. Libya has, in recent years, shared intelligence with the U.S. government that has helped track terrorist networks, including al Qaeda.

The re-establishment of diplomatic relations and the removal of sanctions is also seen as a reward for Libya's surprising dismantling of its nuclear weapons program in 2003. The announcement comes at a time when the United States is looking to convince two other countries on the State Sponsor of Terrorism list -- Iran and North Korea -- that cooperating with international demands will ultimately lead to greater gains for their countries.

"Today's announcement demonstrates that, when countries make a decision to adhere to international norms of behavior, they will reap concrete benefits," Assistant Secretary of State for Near Eastern Affairs C. David Welch said.

The United States will also reopen its embassy in Tripoli, Libya's capital, for the first time since the building was set aflame by a mob and closed in 1979. The United States withdrew its last ambassador in 1972, but withdrew its remaining personnel from the embassy after the attack. Less than two years later, Libyan diplomats were expelled from Washington.

Libya will also be removed from another list: countries not cooperating with the U.S. war on terror. Venezuela was added to this list today, with the State Department citing the country's ties to Cuba and Iran. The decision means that the United States will ban arms sales to Venezuela, whose leader, Hugo Chavez, has been an outspoken critic of U.S. foreign policy.

Removal from these two lists will mean that Libya will no longer be subject to restrictions on U.S. foreign assistance, a ban on arms sales, certain export controls, and other financial sanctions.

The State Department sought to reassure those who remained unsure about the decision to re-establish diplomatic ties with Libya. "This was not a decision that we arrived at without carefully monitoring and assessing Libya's behavior," Welch said.

"The relevant U.S. government agencies conducted a thorough review of Libyan conduct since 2003," he said, citing Libya's having distanced itself from terrorist organizations with which it once had maintained relations.

Scars From Pan Am Flight 103 Linger

The State Department said today's announcement did not indicate the United States had resolved its other concerns about Libya.

"Instead, these steps will enable us to engage with Libyans more effectively on all issues," Welch said. "In particular, we continue to call upon Libya to improve its human rights record and to address in good faith cases pending in U.S. courts with regard to its terrorist activities of the 1980s."

After the mob attack on the U.S. embassy in 1979, U.S.-Libyan relations deteriorated further as the United States accused Libya of supporting several terrorist bombings. Most notable among these were the 1986 bombing of a discotheque in West Berlin frequented by American soldiers that killed three people, including two American service officers, and an explosion aboard Pan Am Flight 103 that brought the plane down over Lockerbie, Scotland, in 1988 -- killing 270 people, most of whom were American.

The Libyan government reached a settlement with the crash victims' families in 2002, to which the United States government was not a party, in which it agreed to pay $2.7 billion, or $10 million per family, in monetary compensation for the attack.

Of that settlement, $4 million was paid to each family after the United Nations removed sanctions on Libya, and an additional $4 million was paid to each after the United States removed additional sanctions. The remaining $2 million was to be paid when Washington removed Libya from its State Sponsor of Terrorism list. The timeline for this decision, however, expired in February 2005, and the money, which had been held in a Swiss escrow account, has since been removed.

The announcement on Libya was met with mixed emotions by the families of the crash victims.

Jim Kreindler, the attorney representing 130 of the 270 victims' families during negotiations with the Libyan government, spoke with many of the families today. He told ABC News that some were pleased that Libya had taken steps to reform itself and ensure that no more lives would be lost as a result of its actions. Others, he said, still maintained bitter feelings toward Libya and especially its leader, Moammar Ghadafi, saying that he should be imprisoned.

Now that Libya has been removed from the State Sponsor of Terrorism list, under the original agreement Libya is to pay the remaining $2 million to each family. It remains to be seen if this agreement will still be honored since the escrow account has expired.

"We have continually expressed to the Libyans that whenever the secretary of state offers findings that Libya will come off the list, that Libya should put the money back into the escrow account and then indicate that it'll abide by the agreement," Kreindler said.