France unblocks Libya cash, NTC denies oil deal

French Foreign Minister - Alain Juppe

PARIS, Sept 1 (Reuters) - France said on Thursday it had U.N. approval to release 1.5 billion euros ($2.16 billion) of Libyan assets to help rebuild the country, and the interim ruling council denied a report of an oil deal with Paris.

Foreign Minister Alain Juppe told RTL radio that with the situation in Libya now stabilising it was time to give the National Transition Council quick access to the funds it needed for civilian requirements and to start reconstruction.

"We have to help the National Transitional Council because the country is devastated, the humanitarian situation is difficult and there's a lack of water, electricity and fuel," Juppe said.

The approval by the United Nations Sanctions Committee will release a fifth of total Libyan assets of around 7.6 billion euros parked in France, and follows the release of a similar amount of funds in the United States and Britain.

Asked about a letter published by the daily newspaper Liberation saying the NTC had agreed a deal in April to give France priority access to 35 percent of Libyan oil in exchange for its backing, Juppe said he was unaware of such a letter or agreement. Reuters saw a copy of the letter.

The NTC denied the report and a French diplomatic source and an oil industry source both said they knew nothing about any oil deal with France.

"It's a joke. It's false," NTC spokesman Mahmoud Shammam said, adding that such a deal was unthinkable. Shammam and interim Prime Minister Mahmoud Jabril were both mentioned in the letter.

Juppe told RTL he was not aware of any specific arrangement.

"I am not aware of this letter," he said. "What I know is the NTC said very officially that concerning the reconstruction of Libya it would turn in preference to those who helped it. That seems fair and logical to me."

"There's a declaration by the NTC but I am not aware of a formal deal. We're not alone. Italy is also there, (and) the Americans."

France hosts an international conference on Libya later on Thursday when NTC leaders will sit down with world powers to discuss Libya's reconstruction.

While the three-hour agenda is focused on the political and economic rebuilding, talks on the sidelines are expected to reflect early jostling for lucrative contracts in oil, utilities, infrastructure and other areas.

"You know this operation in Libya costs a lot. It's also an investment in the future because a democratic Libya is a country that will develop, offering stability, security and development in the region," Juppe said