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Qaddafi Hosts Rice in Tripoli as U.S., Libya Seal Normal Ties

By Viola Gienger

Sept. 5 (Bloomberg) -- Libyan leader Muammar Qaddafi greeted Secretary of State Condoleezza Rice at his compound in Tripoli late today, sealing the resumption of ties between the U.S. and an oil-rich country it once branded as a terrorist outcast.

Qaddafi wore a white robe with a green and yellow sash patterned in outlines of the African continent as he welcomed Rice for the highest-level visit by an American official in his 39 years in power.

The two met in the heavily fortified complex of buildings and roads surrounded by a 15-foot-high wall, the same compound the U.S. bombed in 1986 in retaliation for a Libyan-linked attack on a Berlin nightclub in which two U.S. soldiers died.

With reporters allowed into the incense-fragranced room to witness the encounter, Qaddafi put his hand to his heart in greeting and asked how Rice was. ``I'm very well, thank you,'' she answered.

Qaddafi, speaking in Arabic through an interpreter, asked about the impact of Hurricane Gustav on the U.S. Gulf Coast this week. Rice recounted that, while Gustav had done less damage than feared, other tropical storms were churning toward the U.S.

They then went into a private meeting to talk about energy and counter-terrorism, among other topics. The trip ``comes out of a historic decision that Libya made to give up its weapons of mass destruction and to renounce terrorism,'' Rice said in Lisbon earlier today before flying into Libya. She said a Libya that is changing and ``more open'' would benefit the world.

Iftar Meal

Rice's plane landed at a former U.S. air base near Tripoli, the Libyan capital, and her motorcade then traveled the coastal road into the city for a meeting with Foreign Minister Abdel Rahman Shalgam. She is set to join Qaddafi later today in an Iftar meal, which ends each day's fast for Muslims during the holy month of Ramadan now under way.

Relations with the U.S. hit a low point with the 1986 attack on Tripoli and Benghazi ordered by President Ronald Reagan, who had described Qaddafi as a ``mad dog.'' At least 36 Libyans died, including Qaddafi's adopted daughter, according to a State Department chronology of relations with Libya dating to 1786. A U.S. Air Force bomber and its crew of two were lost.

``Obviously there was a long period of isolation,'' Rice said today. The first signals that Libya was interested in reviving relations came after the Sept. 11, 2001, terrorist attacks. Talks between Libya and the U.S. and Britain followed.

``It was at that point that it was possible to really see a different future,'' Rice said. ``But it was a choice that Libya made.''

Abandoned Weapons

Between 2002 and 2005, Qaddafi abandoned a nuclear-arms development effort, pledged to destroy a chemical weapons stockpile, renounced terrorism and offered $2.7 billion to compensate families of the 270 people killed in the Libyan-linked 1988 bombing of a Pan Am jet over Lockerbie, Scotland. The actions led to improved ties with the U.S. and European nations and Western investments to expand Libyan oil production.

Rice came to Libya even though the Libyan government hasn't yet paid into a planned $800 million settlement fund to make final payments to terrorism victims' families. The fund was set up as part of an agreement with the U.S. that is aimed at ending lawsuits that threatened Libyan assets.

Before arriving in Tripoli, Rice said the U.S. expects that Libya will send the funds. ``I can't be certain of the timing,'' she said.

Terror Designation Lifted

The U.S. removed Libya from its state sponsors of terrorism list in 2006 and the two countries established embassies in each other's capitals the same year. Libya, ruled by Qaddafi for 39 years, has been helping the U.S. in North Africa by sharing intelligence about al-Qaeda operatives in the region, according to American officials.

The most senior U.S. official to visit Libya was then-Vice President Richard Nixon in March 1957. John Foster Dulles was the last secretary of state to stop in the country, in 1953.

Rice said she would talk to Qaddafi about oil, foreign policy issues of mutual interest and human rights. She plans to mention two imprisoned critics of Qaddafi's regime, Fathi al- Jahmi and Idris Boufayed. The men were jailed on charges that include unauthorized contact with a foreign government official. Human Rights Watch, a New York-based monitoring group, says the contact was with a U.S. diplomat.

``Of course, it's disturbing, and I'll raise it,'' Rice said.

Investment Needs

During the talks, Rice planned to urge Libyan officials to modernize the legal system and economic policy to better accommodate foreign investment, Assistant Secretary of State David Welch said this week.

Libya has 41.5 billion barrels of proven crude oil reserves, Africa's largest, and seeks to boost production from the 1.63 million barrels pumped each day last month, according to Bloomberg estimates.

``Their regulatory environment, their economic policy environment is less mature than it is in other countries in the immediate area,'' Welch said. ``So we're looking at ways to work with and to develop that better.''

Rice also will visit Tunisia, Algeria and Morocco during her trip.

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