The USA and South Africa have reached a deal on their dispute over whether to allow the UN to release USD 1.5 B of frozen assets of Libya's Gaddafi regime to the benefit of the rebel government.

The agreement came late on Thursday ET (early Friday CET), after South Africa had been blocking the release of the funds at the UN sanctions committee because it said releasing the funds to the Libyan rebels could imply recognition of the rebels' Transitional National Council (TNC) as Libya's government.

South Africa and the African Union have not recognized the rebel administration, though more than 40 countries have, and a major regional organization – the Arab League – just did so on Thursday.

The USD 1.5 B in question are part of the Libyan funds that were frozen by UN sanctions against the regime of dictator Muammar Gaddafi.

As the Libyan rebels appear on the verge of a victory against Gaddafi, US, NATO, EU, and Libyan opposition officials have said those funds will be key in setting up a legitimate TNC-led government to replace the Gadhafi regime that has ruled that nation for four decades.

The deal between the USA and South Africa means that the former will not press for a vote at the UN Security Council to force the release of the funds.

US State Department spokeswoman Victoria Nuland said, as quoted by the BBC, that the unfrozen assets would pay for UN programs, energy bills, health, education and food, and would not be used for any "lethal or military purposes", which was confirmed shortly after that by US State Secretary Hillary Clinton in a statement.

"Today, we have secured the release of USD 1.5 B in Libyan assets that had been frozen in the United States. This money will go toward meeting the needs of the people of Libya," Clinton said, adding, "We urge other nations to take similar measures. Many are already doing so."

"As funds are released, we look to the Transitional National Council to fulfill its international responsibilities and the commitments it has made to build a tolerant, unified democratic state," Clinton declared.

"It is critical that the TNC engage swiftly with communities and leaders across Libya to ensure order, provide critical basic services to the people, and pave the way for a full democratic transition," Clinton said. "Libya's future will be peaceful only if the leaders and people of Libya reach out to each other in a spirit of peace. There can be no place in the new Libya for revenge attacks and reprisals."

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