Libya to fund Gaza homes after Israel approves aid

GAZA (Reuters) - A rare agreement between foes Israel and Libya will let Libya underwrite the rebuilding of 1,250 Gaza Strip homes destroyed in Israel's offensive there last year, U.N. officials said on Tuesday.

But Libya denied there was any link between the aid agreement and the release this week of an Israeli photographer arrested five months ago in the north African country.

Israel and Libya are technically in a state of war, and oil exporter Libya has been one of Israel's most outspoken critics on the international stage for decades.

The United Nations Relief and Works Agency (UNRWA), which looks after Palestinian refugees, said under a deal between the two countries Israel would allow Libya's Gaddafi Foundation charity to provide $50 million to rebuild Gaza homes.

In notably measured remarks about an age-old enemy, Israeli Foreign Minister Avigdor Lieberman this week described Libya as a "reliable partner".

Lieberman, with assistance from an Austrian mediator, obtained the release of 34-year-old Rafael Hadad, an Israeli photographer who was detained in March after traveling to Libya on a passport issued by Tunisia, the country of his birth.

An Israeli official, speaking on condition he not be named, said Libya had offered Hadad's release in exchange for being allowed to deliver a shipload of aid to Gaza.

Asked by Reuters if there was a link between the aid and the Hadad's release, Gaddafi Foundation Executive Director Youssef Sawani told Reuters: "Definitely not."

Sawani said obtaining approval to launch the reconstruction work was one of the concessions Libya won from the Israelis in exchange for last month diverting a Libyan-chartered aid ship bound for Gaza toward an Egyptian port instead.

He said the aid deal would clear the way for reconstruction projects which are backed by other Arab donors but until now have been stalled because of Israel's blockade.

"What we have achieved is that we have managed to change the context and the Israeli attitude now is different toward these projects," he said by telephone from Tripoli.

GAZA BLOCKADE

The Israeli blockade of Gaza has been the subject of international debate since nine activists were killed when Israeli troops raided a Turkish-led aid flotilla in May.

Peter Ford, a representative of UNRWA's commissioner general, said at the signing of the agreement with the Gaddafi Foundation that hundreds of Palestinian families would benefit significantly from the deal, but Israel should do more.

"UNRWA calls on the Israeli authorities to issue the necessary permissions promptly to allow us to use not only these new Libyan funds, but also Saudi, Dutch, Japanese, and other funds which are available to remedy this dreadful situation," said Ford in a statement released by UNRWA.

Israel imposed a blockade on the Gaza Strip in 2007 after Hamas Islamists took over the territory.

Israel bars the import to Gaza of cement and steel which it says could be used for fortifications and weapons production. The United Nations says this makes it difficult to rebuild Gaza.

Israel says the blockade on Gaza, which was eased in June, is aimed at preventing the territory's Hamas rulers from bolstering their weapons stockpile. It also aggravates the privations of 1.7 million Palestinians in Gaza, many of whom depend on U.N. aid.

(Additional reporting by Salah Sarrar in Tripoli and Christian Lowe in Algiers; Writing by Ori Lewis and Christian Lowe; Editing by Andrew Roche)