Safe Passage for Terrorists : Secret Deals With Libya by France, Italy Reported

France and Italy made secret deals with Libya during the 1970s to spare their citizens from attack in exchange for freedom for Libyan-sponsored terrorists to travel through Europe, U.S. officials said Thursday.

The deals, which have since collapsed, were discovered by Reagan Administration officials last year when they attempted to bring the Europeans into a united effort to pressure Libyan leader Moammar Kadafi, one aide said.

“The French had a deal with Libya and a deal with the PLO (Palestine Liberation Organization),” a State Department official said. “Italy had its own deals. The French used to think that between the PLO and the Libyans, they had it all sewed up.”

As a result, he said, “the French would look at a guy, a known terrorist, as he went through their airports and not lift a finger.”

Today, officials said, such kid-gloves treatment is no more. The secret pacts disintegrated after Libyan-based terrorists bombed restaurants in Paris and attacked the Rome and Vienna airports last December, killing 16 people. Four of the terrorists also died in the airport attacks.

Secretary of State George P. Shultz, who discussed terrorism last week with officials in France, Italy and Greece, says he is encouraged by the Europeans’ gradual movement toward more active cooperation with U.S. efforts against terrorism and the Reagan Administration’s campaign against Kadafi.

Moving for Action

“I think people are moving in the direction of more action,” Shultz said during his trip, specifically praising Greece and Italy.

But other officials said they are still dissatisfied with the level of the European effort and pointed to the now-defunct deals with Libya and the PLO as examples of what the United States had to deal with.

“There has been a feeling throughout Western Europe that you can have an accommodation so you won’t have terrorism in country X, and in exchange terrorists could come and go from country X freely,” Robert B. Oakley, director of the State Department’s counterterrorism office, said in an interview with National Public Radio.

Agreement Fails

“They acknowledge in private that they’ve had such arrangements blow up in their faces, figuratively and literally, in airports and cafes,” he said. “You have a gentleman’s agreement with a terrorist, and unfortunately the terrorists turn out not to be gentlemen.”

A spokesman for Italy’s embassy in Washington, Massimo Baistrocchi, denied that his government had ever entered the kind of pact described by the U.S. officials, but he acknowledged that the Italian intelligence agency did establish a cooperative relationship with their Libyan counterparts.

“We never dealt with terrorists. We never had any agreement,” Baistrocchi said. “We had a crazy, terrible problem of terrorism within Italy. It is not possible that we would be fighting terrorism on one side and dealing with it on another.”

Contacts Confirmed

He added: “It is true that there were contacts between our secret (intelligence) service and the secret service of Libya. Kadafi was giving us information on terrorism and other issues.”

An official at France’s embassy who asked not to be identified said he could not confirm or deny the report of a deal. “If anything like that was done, it was done some time ago, and secretly,” he said. “We wouldn’t have any comment on it.”

The U.S. officials who described the arrangements said that they were not certain when the deals were struck but that they appeared to be products of the wave of terrorism in the mid-1970s, when European police forces were hard-pressed to deal with the violence in their own countries.

‘Nonaggression Pacts’

At the time, working out “nonaggression pacts” with the Libyans and the PLO may have appeared sensible because it seemed to reduce the immediate threat of terrorism, they said.

Greece and West Germany also maintained contacts on terrorism with Libya and the PLO, they said, although it was not clear whether they negotiated similar deals.

In one celebrated case in 1977, France arrested an alleged planner of the PLO attack on the 1972 Munich Olympics, Abu Daoud, only to release him a few days later.

But over the long run, Oakley said, Kadafi’s increased interest in terrorism and the splintering of authority within the PLO led to the breakdown of the agreements.

“When it’s perceived that you’re willing to make deals with terrorists as the French have been, then more people are taken hostage, because it increases their leverage,” he added.

State Department officials are particularly critical of France because they say it has resisted the Reagan Administration’s counterterrorism initiatives more strongly than any other European ally.

Italy has taken a much tougher stance, especially since the Dec. 27 attack on Rome airport, and it holds more than 40 accused international terrorists in its prisons, they said.

“The French attitude is basically that this bandwagon is not one we’re gonna get on,” one aide said. “Their style is still to let terrorists go rather than hold them.”

Security Tightened

Most Western European countries, including France, have tightened their security measures in recent months and are moving toward new restrictions on Arab passport-holders, many of whom now need no visas, officials said.

But they continue to resist the Administration’s pleas for a complete economic and political boycott of Libya. Most European countries have agreed to stop selling weapons to Kadafi, but only a few have joined the United States in breaking diplomatic relations or halting all trade.

“Economic sanctions have never been very effective,” the French Embassy official said, explaining his government’s position.

As an initial step, State Department officials have been asking the European allies to cut off their contracts with Kadafi’s government-owned airline, a move that could ground the carrier.

But they have had no success. France still provides Libyan Arab Airlines with most of its maintenance; Britain, usually a staunch supporter of the United States, provides Libyan pilots with much of their training.

British authorities were embarrassed last week when, in the midst of the U.S.-Libyan military confrontation in the Gulf of Sidra, several of the commercial pilot trainees publicly offered to fly kamikaze missions against the American fleet.

“They were embarrassed,” a U.S. official said. “But they didn’t do anything.”