Gaddafi regime staked £12bn on secret deal in bid to open peace talks

The Libyan regime has been negotiating a secret deal with Greece to use $20bn (£12bn) of its funds that are frozen abroad for humanitarian relief to benefit both sides in the civil war. Officials in Tripoli say the move is intended to pave the way for the opening of peace talks.

The Independent has learned that talks were held in Tripoli between a team led by a former diplomat close to the Greek Prime Minister George Papandreou and regime members including the Libyan Prime Minister Al-Baghdadi Al-Mahmoudi. The meetings resulted in a memorandum of understanding that has remained unsigned because, diplomatic sources said, of warnings by the French government to the Greeks that any such agreement would appear to give Muammar Gaddafi legitimacy as Libya's ruler and undermine the policy of the Western coalition to keep him isolated.

Sources within the Libyan regime maintain that an agreement on the use of its assets for aid could lead to a ceasefire agreement and a process under which Colonel Gaddafi would relinquish power while a caretaker administration can be formed that includes members of the Benghazi-based opposition