A Tad Premature

The US is restoring diplomatic ties with Libya and would no longer be considered a state sponsor of terrorism. Consider that this is part of Khadafi's rapproachment with the US following the US invasion of Iraq. The US had discovered through the Proliferation Security Initiative that Libya was further along in its nuclear weapons research than anyone have ever considered possible.

Ms. Rice called the moves "tangible results that flow from the historic decisions taken by Libya's leadership in 2003 to renounce terrorism and to abandon its weapons of mass destruction programs."

She also used the occasion to hold out hope for improvement in the current standoffs between the Bush administration and Iran and North Korea, which have been accused of seeking to develop nuclear weapons.

"Just as 2003 marked a turning point for the Libyan people so too could 2006 mark turning points for the peoples of Iran and North Korea," Ms. Rice said in a statement. "Libya is an important model as nations around the world press for changes in behavior by the Iranian and North Korean regimes."

Libya came forward in December 2003, disclosing its secret nuclear and missile programs and promising to cooperate fully with international investigations. American officials say the information gleaned from Libyan records was crucial in tracking the reach of the illegal proliferation network run by A.Q. Khan, Pakistan's top nuclear scientist.

The United States reopened a two-person interest section in the Belgian embassy in Tripoli in 2004, but has not had an ambassador there since 1972, three years after Col. Muammar el-Qaddafi seized power in a coup. The ambassador was withdrawn to protest his support for "international terrorism and subversion against moderate Arab and African governments," according to the State Department's Country Note on Libya. The entire embassy was withdrawn in 1979 after a mob set fire to it.

UPDATE:
LGF notes that Libya's actions on terrorism and behavior towards the US isn't in agreement with the US move to pull Libya's name from the list of state sponsors of terrorism, although many Libyans do want improved relations with the US. Some have even pointed out that this may help the US secure supplies of oil - as always one has to follow the money.