BERLIN, Aug 11 (AFP) - Libya's decision to compensate scores of people wounded in a deadly Berlin nightclub bombing 18 years ago will bring it not only new international legitimacy but sorely-needed economic assistance.
When the Libyan ambassador announced that 35 million dollars (28.4 million euros) would be paid to the victims, Berlin said it would help modernise Libya's economy and that Chancellor Gerhard Schroeder could soon visit.
Currently Germany's fourth-largest supplier of oil, Libya can expect the government in Berlin to sign up to a bilateral investment agreement and allow Tripoli to return to its official "Hermes" export guarantee scheme.
A German-Libyan business forum will also be held in Tripoli November 28-30.
Libya's oil reserves, proven at 36 billion barrels but with great further potential, are highly attractive to foreign oil firms because of their quality and low cost of recovery and the country's proximity to European markets.
"The intensification of bilateral relations has now become possible," the government said in a statement after the ambassador's announcement on Tuesday.
Under the agreement, compensation will be paid to 168 mainly-German survivors of the attack and to the family of a Turkish woman who died, along with two US servicemen, when the La Belle discotheque in what was then West Berlin was bombed in 1986.
In 2001, a German court sentenced four people to up to 14 years in prison and confirmed that Libya was partially responsible, although Tripoli still refuses to take the blame.
A lawyer for the civil plaintiffs said that 350,000 dollars would be paid to 11 people who were badly wounded and 188,000 dollars to 157 who received lesser injuries. The Turkish woman's family will receive one million dollars.
The sum is a little over half that originally sought by German negotiators and one tenth of what was paid to relatives of people killed in the Libyan-blamed bombing of a Pan Am jet over Lockerbie, Scotland in 1988.
But the deal appears enough for Berlin to build on the relatively good relations it maintained with Libya throughout its years of isolation.
The agreement, to be officially signed in Tripoli on September 3 reportedly with Schroeder present, comes after President Moamar Kadhafi's visit to Brussels in April.
His diplomatic triumph though was built on a clear willingness to get out the chequebook to resolve Libya's problems abroad, such as the compensation accords concluded in January over a French airliner blown up in 1989.
However those accords, along with Kadhafi's announcement in December that he would renounce weapons of mass destruction, could also be as important for the West's relations in northern Africa and the Middle East as much as for Libya.
"The agreement will strengthen relations," Saleh Abd Ussalam from the Kadhafi Foundation, which is chaired by the Libyan leader's son Saif al-Islam, said Wednesday.
But in Tripoli, the foundation appeared to complicate matters by demanding compensation from the United States for airstrikes launched by former president Ronald Reagan in retaliation for the La Belle attack.
The April 16, 1986 strikes on the Libyan capital killed 41 people and wounded 226.
The foundation said in a statement that they "undoubtedly deserve to be properly compensated and honored and those who carried (out) this action be brought to justice."