The Obama administration formally recognized a rebel group as Libya's government, giving the forces struggling to overthrow Moammar Gadhafi's regime for the last five months a dramatic diplomatic boost and potentially access to billions of dollars in badly needed cash.
Setting aside fears that Islamic radicals may emerge among the insurgents, Secretary of State Hillary Rodham Clinton announced Friday in Istanbul that the United States would join more than 30 other nations in extending diplomatic recognition to the Transitional National Council, which is based in Benghazi and controls eastern Libya.
Gadhafi's four-decade-old regime, which controls much of western Libya, no longer has legitimacy to govern the country, Clinton said. As a result, she added, Washington will deal with the council as the legal government "until an interim authority is in place."
In a radio broadcast, Gadhafi poured scorn on the decision, and insisted he is not giving up power or leaving the country.
"I don't care which countries recognize the rebels' transitional council," he said, according to the Associated Press. "Tell NATO and other countries to pick up the white flag and ask our forgiveness."
NATO warplanes, backed by U.S. intelligence and other support, have been bombing Gadhafi's forces and other ground targets since March 19 under a U.N. mandate to protect civilians. But the poorly trained and lightly armed rebels appear stalled on several fronts, and have yet to dislodge Gadhafi's regime.
The move comes at a time when Western and Arab governments are increasingly eager to wind down the war. Pressure is building in several European countries for an end to a conflict that was originally expected to last fewer than 90 days.
In one sign of the eagerness to end the war, Turkish officials said at the Istanbul meeting that they, like the French and some other governments, were prepared to consider the possibility of an internal exile for Gadhafi, rather than his departure from the country.
The chief effect of recognition may be financial. The rebels have pleaded with Washington and other governments to release frozen Libyan assets, including $34 billion held in U.S. banks, and that now appears increasingly likely. France said it was taking steps to unfreeze $250 million, while Italy said it was moving to unfreeze $100 million. U.S. officials said it would take time to release the Libyan money because of legal restrictions, but the task is easier if the council is the recognized government.
The rebels have said they need $3.5 billion this year to prosecute the war and administer the cities and towns they control.
The rebels also hope to draw cash from a temporary trust fund set up by the 32-member contact group for Libya, which was meeting in Istanbul and includes the Arab League and the U.N. That money has been held up by countries that donated it but are seeking assurances that the council intends to set up an inclusive and democratic government.
The move Friday also has a symbolic component. It may give the rebels added legitimacy among ordinary Libyans, including those in Gadhafi-controlled areas of the country's west. Supporters hope it will help convince Gadhafi's forces that his regime cannot survive much longer.
The Obama administration has been deeply divided on extending diplomatic recognition to the rebels since the armed uprising broke out in eastern Libya last February.
The rebellion spread quickly, but then regime forces moved to regain territory and Gadhafi threatened to massacre his opponents. Despite the NATO air campaign, the conflict has appeared stalemated for months, with the country effectively cut in half.
Some White House officials, as well as members of Congress, warned that the council's membership and goals were unclear, and potentially dangerous.