US and South Africa strike a deal to unlock $1.5bn of Libyan assets

The United States and South Africa struck a deal last night to allow the release of $1.5bn in frozen Libyan funds, giving the Transitional National Council (TNC) a financial boost as it looks to post-Gaddafi rule.

Diplomats said the agreement would enable the funds to be released without a UN Security Council vote on a US draft resolution submitted to the council on Wednesday in response to South Africa blocking a US request to disburse the money.

South Africa had remained steadfast in opposing the move until last night, and agreed to the deal on the condition that there be no mention of the TNC, which the African Union (AU) has not recognised, in the official request for the release of the funds.

The past beneficiary of hugely lucrative investment deals, South Africa has said that the Nato action in Libya has undermined the AU's attempts to reach an amicable settlement through "quiet diplomacy'' between the warring sides. The country's vice-president has suggested that Nato could be prosecuted for over-stepping its mandate.

Pretoria's stance had been attacked by several governments. David Cameron spoke to President Jacob Zuma yesterday to express Britain's disappointment.

South Africa is the architect behind the African Union "road map'' for Libya and says it cannot recognise the TNC while the AU still considers its own peace plan to be alive. This stance has been undermined, however, by the Nigerian government's decision to endorse the rebel movement.

AU leaders are holding an emergency meeting on Friday in the Ethiopian capital Addis Ababa to discuss a joint position. Only 11 African countries have so far recognised the TNC and for the AU to do so would be tantamount to it sinking its own peace plan.

Deputy President Kgalema Motlanthe's call on Wednesday for Nato forces to face a war crimes investigation plays to a domestic audience that sees the Libyan rebellion as neo-colonialism. The African National Congress – in common with dozens of former and current African leaders, ruling parties and Treasuries – received millions of dollars from Colonel Gaddafi over the years and long pandered to his dream of becoming president of a united Africa devoid of colonial borders.

South Africa's foreign affairs spokesman Clayson Monyela said the AU's roadmap includes drafting a new constitution under the supervision of the transitional government, and a referendum on the new constitution, leading to democratic elections. "Our hope, as the South African government, is that this will be an inclusive process, which will have the elements of the TNC and that of the Gaddafi regime," he said.

In reality, South Africa's position looks increasingly untenable as more countries recognise the TNC as Libya's legitimate government.

Turkey yesterday hosted a conference in Istanbul for the 28-member Libya Contact Group, which called on Colonel Gaddafi to hand himself in to avoid further bloodshed.

Turkish Foreign Minister Ahmet Davutoglu urged the international community to "empower the TNC". He said: "The Libyan people won the war for freedom, now it is time for peace. We should redouble our efforts to extend support to the TNC."

William Hague, the Foreign Secretary, yesterday described the Gaddafi regime as "finished". He said: "There is no way back for the Gaddafi regime and clearly many of its key members are on the run."

Brazil, meanwhile, cautioned against repeating past mistakes. Its Foreign Minister Antonio Patriota last said that decisions over Libya's future must not be dominated by Nato powers once the fighting ends, emphasising the need for the UN Security Council to lead the way. "It's important that mistakes made in other places, for example Iraq, are not made again," he said.

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