The United States and Libya Thursday signed an agreement in Tripoli, designed to settle all remaining U.S. compensation claims from Libyan-sponsored acts of terrorism in the 1980s. Lingering claims disputes have been blocking the full normalization of relations between the two countries. VOA's David Gollust reports from the State Department.

Top US diplomat for the Middle East, David Welch, embraces Ahmed al-Fatouri, Libya's Deputy Foreign Minister, after signing of  cooperation agreement in Tripoli, 14 Aug 2008

The signing of the comprehensive claims settlement agreement climaxes a major push by the two governments in recent months to resolve the compensation issue, and Assistant Secretary of State for Near eastern Affairs David Welch said in Tripoli it will "turn a new page" in the bilateral relationship.

The U.S.-Libyan rapprochement began in 2003, when the Tripoli government renounced weapons of mass destruction and terrorism and agreed to pay compensation for terror attacks attributed to Libya - most notably the 1988 bombing of a U.S. Pan Am jumbo jet over Lockerbie, Scotland that killed 270 people.

Libya agreed to provide $10 million in compensation to the families of each Lockerbie victim in a phased payout linked to normalization steps. But the process became bogged down in legal disputes, with the remaining $500 million of the $2.7 billion package unpaid.

Under the agreement signed Thursday, Libya is to put up an additional sum of about $1 billion to be distributed by a new entity set up by the U.S. government, to Lockerbie families and victims of other attacks, including the 1986 bombing of a Berlin disco that killed two U.S. soldiers. The deal would also settle Libyan claims from U.S. air strikes against Libya in the 1980s.

State Department Deputy Spokesman Robert Wood described the accord in a briefing for reporters.

"The agreement is designed to provide rapid recovery of fair compensation for American nationals with terrorism-related claims against Libya," he said. "It will also address Libyan claims arising from previous U.S. military actions. The agreement is being pursued on a purely humanitarian basis, and does not constitute an admission of fault by either party."

The effort to resolve the compensation issue cleared a major hurdle two weeks ago, when the U.S. Congress approved and President Bush signed, a measure giving Libya immunity from further terrorism-related U.S. lawsuits once compensation for remaining cases had been paid through the new fund.

Though the United States and Libya announced a normalization of relations in 2006, members of Congress concerned about compensation cases had blocked funds for building a U.S. embassy in Tripoli and prevented a full U.S. ambassador from taking up residence there.

U.S. oil companies and other firms have begun operations in Libya in recent years but Libyan investment in the United States has been severely limited by the prospect of asset seizures stemming from terrorism cases.

In his remarks in Tripoli, Assistant Secretary Welch said the agreement would resolve the last major historical issue that has stood in the way of a more normal U.S.-Libyan relationship.

Welch met Libyan leader Muammar Gadhafi Wednesday and said he had conveyed the best wishes of the American government and a personal message to Mr. Gadhafi from President Bush.