Libya Thrashing About to Shake U.N. Sanctions Hook

In one of several desperate bids to ease the tightening grip of U.N. sanctions, Moammar Kadafi’s troubled regime in Libya has held out the prospect of turning over an indicted CIA renegade to appease the U.S. government, according to U.S. sources and a former CIA official.

Libya also may be willing to pay millions of dollars in compensation to families of those who died in the 1988 bombing over Scotland of Pan American Flight 103 in hopes of eliminating its most outspoken critics and thus easing international pressure, according to families and their representatives.

But neither the Clinton Administration nor the families of victims appear interested in either possibility because they want to maintain pressure on the Kadafi regime and hold it accountable for the disaster.

The moves and other recent steps come as Libya today marks the 25th anniversary of Kadafi’s bloodless military coup ending the reign of King Idris I in 1969.

U.N. sanctions imposed last December coupled with plummeting prices have cut annual oil revenues from $21 billion a decade ago to about $6 billion, making this the most difficult year of Kadafi’s rule, according to U.S. and Arab officials. As a result, Tripoli has spent at least $50 million in two years on ploys first to prevent sanctions, then to negotiate an easing of the punitive economic, arms and air travel restrictions, a U.S. official said.

The sanctions were imposed after Libya failed to cooperate with investigations of the Pan Am 103 disaster and the bombing in 1989 over Niger of a French airliner in which 171 died.

“The Libyans are out there trying to make as many inroads as possible,” said a senior U.S. counterterrorism official. “Every third person who has ever held a government position in this town has called us and said they’ve been approached. And each claimed to have a great deal going.”

One of the latest centers on CIA renegade Frank Terpil, a communications expert indicted with CIA undercover agent Edmund Wilson in 1980 for conspiring to kill a Libyan dissident and for selling tons of explosives to Libya. The episode was one of the CIA’s darkest, most embarrassing moments.

Terpil--convicted in absentia and sentenced in New York to 30 years on arms charges--has spent the intervening years in Libya, Syria and Lebanon, as well as in Eastern Europe before communism’s demise there. According to a former government official who keeps close track of the fugitive, Terpil recently has spent limited time in Libya and has been spotted throughout Eastern and Western Europe, as well as in Havana.

Abdullah Sanoussi, chief of Libyan intelligence, was scheduled to meet in late June in Cairo with former CIA counterterrorism expert Vincent Cannistraro to discuss possible assistance with Terpil’s capture, according to Cannistraro and U.S. officials.

The meeting was postponed after Sanoussi, Kadafi’s brother-in-law and closest confidant, was injured in a car accident, Cannistraro said.

Officials of the Arab League, headquartered in Cairo, set up the meeting, he said. Several Arab governments are unhappy about the U.N. sanctions because of the effect on their own economies or angry because of perceived Western anti-Islamic or anti-Arab bias.

Egypt, for example, has about 750,000 workers in Libya whose remittances to relatives at home are vital to Egypt’s economy. Egypt “also needs Libya as a safety valve for foreign employment of a significant portion of its labor force,” a U.S. specialist said.

Libya’s approach to Cannistraro fits what has become its modus operandi of trying to hire well-known figures to plead its case. At the CIA, Cannistraro investigated Libyan links with international terrorism. Having appeared on many U.S. television programs and served as an ABC News consultant, he is now the most visible former CIA counterterrorism official.

In the past, Libya or its representatives have tried to hire such figures as Judge Abraham Sofaer, who as chief State Department legal adviser during terrorism attacks in the 1980s helped develop the case against Libya’s use of state-sponsored terrorism.

Famed defense lawyer F. Lee Bailey, who represented five clients in the Pan Am bombing, went to Tripoli last year to discuss Libya’s request that he defend Abdel Basset Ali Megrahi and Lamen Khalifa Fhimah, the two Libyans indicted by the United States and Scotland for the Pan Am bombing, in which 270 people died.

Bailey subsequently complained about not being paid a $40,000 fee for the four-day consultation, although the National Law Journal reported that he received $15,000 in expenses.

Cannistraro said he agreed to talk with the Libyan intelligence chief as a “volunteer” and did not stand to benefit from the meeting financially or otherwise. He described Libya’s motive as “an attempt to get out from under sanctions.”

But U.S. counterterrorism officials, informed in June of the meeting, said Wednesday that they did not authorize any deal.

“We know the Libyans are mounting a sophisticated diplomatic and public relations campaign,” the senior official said. “The Libyans know our terms” on Pan Am 103 and terrorism generally, “and they do not include Frank Terpil.”

Like Carlos the Jackal, the terrorist extradited from Sudan to France last month, Terpil is a figure from the past and is no longer as urgently sought, U.S. sources said.

Libya may have held him out as bait because he has been so elusive for 15 years. His colleague Wilson was duped, in an elaborate U.S. scheme, into leaving Libya in 1982 for the Dominican Republic. There, officials put him on a plane for New York on grounds that his papers were not in order. Federal agents were waiting for him and he is now in prison.

A similar scheme in Beirut in the early 1980s failed when he slipped away. Subsequently in Prague, a planted intermediary offered Terpil payment for a news “interview” to be conducted in London, but he did not take the bait.

Although Cannistraro predicted last week that the meeting to discuss Terpil’s capture might be rescheduled for this week, he said Wednesday that he now believes the exercise was “strictly propaganda” and has disassociated himself from it.

Concern is also growing among some families of Pan Am victims that a class-action lawsuit would ease pressure to hold Kadafi accountable for the bombing. Many angry relatives of victims claim the lawsuit amounts to an attempt to get them to stop demanding accountability or tougher action.

The suit seeks $3 billion or up to $11.5 million per family. It was filed by U.S. lawyer Allan Gerson against Libya in June. If the court agrees to hear the case, all victims’ families are automatically included, unless they opt out.

Gerson has argued that financial compensation is a form of punishment--and may be the only recourse for families because of the inability of the United States and United Nations to get Kadafi to hand over Megrahi and Fhimah. “Even for an oil-rich country, $3 billion adds up,” he said.

But several families assert that the ultimate goal is a pretrial settlement that might serve to help get Libya off the hook. Some families and their representatives believe the framework of a deal already may have been cut in exploratory talks between Gerson and Abdelhay Sefrioui, one of Libya’s lawyers based in Paris.

Gerson and Sefrioui told The Times that they have talked but declined comment on the families’ concerns. While acknowledging that a settlement is always possible and that it may come up, Gerson called reports of an offer on the table “crazy.”

Tripoli’s maneuverings reflect its escalating problems. Since sanctions were imposed, Libya’s deteriorating economy has taken a nose-dive, U.S. officials said.

“Kadafi is trying to survive,” said Henry M. Schuler, an expert on Libya at the Center for Strategic and International Studies here. “He’s used oil money over the past 25 years to co-opt opposition and stay in power. Now, he’s doing the same with foreign opposition.”

But the maneuvers are unlikely to work, said U.S. officials, lawyers involved in the Pan Am case and victims’ families. “Libya’s purposes are clearly political,” said Lee Kreindler, a lawyer for victims’ families.

“I don’t think there was ever any intent of paying any money,” Kreindler said. “Many offers over the years have been used only for public relations purposes to get out from under sanctions.”

*

Times staff writer Ronald J. Ostrow contributed to this report.