updated 11/17/2008 11:22:57 AM ET 2008-11-17T16:22:57

President George W. Bush called Libya's Moammar Gadhafi to voice his satisfaction with a $1.5 billion payment that Tripoli made to settle a long-standing dispute over terrorist attacks, including the bombing a Pan Am jet over Scotland, the White House said Monday.

In their conversation, Bush and Gadhafi "discussed that this agreement should help to bring a painful chapter in the history between our two countries closer to closure," White House spokesman Gordon Johndroe said in a statement.

Libya's Oct. 31 payment cleared the last hurdle in restoration of full normalization of diplomatic relations between Washington and Tripoli. The money will go into a $1.8 billion fund that will pay $1.5 billion in claims for the 1988 Pan Am 103 bombing over Lockerbie, Scotland, and the 1986 bombing of a German disco. Another $300 million will go to Libyan victims of U.S. airstrikes ordered in retaliation for the disco bombing.

David Welch, a State Department diplomat who negotiated the agreement, said at the time that payments to U.S. victims' families should start within days, and family groups hailed the news.

"While we will always mourn the loss of life as a result of past terrorist activities, the settlement agreement is an important step in repairing the relationship between Libya and the United States," said the statement that Johndroe released Monday.

"Libya has taken important steps on the road to normalizing its relations with the international community, beginning with its renunciation in 2003 of terrorism and weapons of mass destruction," the statement said. "The United States will continue to work on the bilateral relationship with Libya, with the aim of establishing a dialogue that encompasses all subjects, including human rights reform and the fight against terrorism."

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