Libya and Italy seen set to sign compensation deal

Libya and Italy will soon seal a deal worth "billions" to compensate for the European country's three-decade colonial rule, Libyan leader Muammar Gaddafi's influential son said on Thursday.

"In the next weeks, Libya will sign a deal with Italy on compensation for the colonial period. This deal ... amounts to billions," Saif al Islam told an official gathering in Tripoli.

Saif did not specify a currency when he mentioned the figure of billions.

The accord involves several projects including a motorway across Libya, education and clearing mines dating back to the colonial era, he said in a speech broadcast on state television.

In Rome, Prime Minister Silvio Berlusconi said he hoped a "friendship treaty" with Libya could be signed by the end of August.

An Italian Foreign Ministry spokesman said the negotiations "are at a good point but some important aspects have not yet been defined".

Italy, which ruled Libya from 1911 to 1943, has had difficult relations with Gaddafi since he took power in 1969.

In 1970, Gaddafi expelled Italian residents and confiscated their property. But ties have warmed in recent years and Rome, as Libya's main diplomatic interlocutor and trading partner in Europe, backed Tripoli's drive to mend fences with the West.

Both countries have long sought a deal on compensation for Italy's colonial policies, which included the deportation of thousands of Libyans to Italy.

Italy imports around 25 percent of its oil and 33 percent of its gas from Libya and has a strong business presence there.

Ties have been under pressure from the flow of illegal immigrants from Libya's coast to Italy's south, and the absence so far of any reparation payments.

In a separate compensation case, Saif said Tripoli proposed to Washington a "comprehensive" deal that links any payment for American victims of terror attacks to a settlement of claims by victims of a U.S. bombing campaign against Libya in 1986.

Libya made the condition of compensating the Libyans during talks with the United States, the latest round of which took place in the United Arab Emirates on Wednesday.

"We offered them a comprehensive deal putting all the cases in one package but we want them to compensate the Libyan victims of the U.S. strike. This is our condition and they must satisfy it," Saif said in his speech.

Libya said at least 40 people were killed, including Gaddafi's adopted daughter, when U.S. war planes bombed Tripoli and Benghazi in 1986 in retaliation for the bombing of a German disco frequented by U.S. servicemen that year blamed on Libya.

The pending legal issues include cases involving the bombing of Pan Am Flight 103 over Lockerbie, Scotland, the 1986 German disco bombing, as well as billions of dollars in damages to relatives of Americans killed in a 1989 suitcase bombing of a French airliner over Niger.