WASHINGTON: US President George W Bush called Libyan leader Muammar Gadaffi yesterday to express satisfaction that the compensation agreement for victims of terrorism had been fully implemented.

It was the first time the two leaders had spoken and was a sign of warming ties between their countries that began after Libya gave up its weapons of mass destruction program in 2003.

In their conversation, Bush and Gadaffi discussed that this agreement should help to bring a painful chapter in the history to closure.

Libya's October 31 payment cleared the last hurdle in restoration of full normalisation of diplomatic relations between Washington and Tripoli.

At the time, Bush signed order to restore Libya's immunity to legal action pending in US courts.

The money will go into a $1.8 billion (BD567m) fund that will pay $1.5bn in claims for the 1988 Pan Am 103 bombing over Lockerbie, Scotland, and the 1986 bombing of a German disco.

Another $300m will go to Libyan victims of US airstrikes ordered in retaliation for the disco bombing.