Libyan leader seeks energy deals with Russia

MOSCOW Sat Nov 1, 2008 9:15am EDT

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MOSCOW Nov 1 (Reuters) - Libyan leader Muammar Gaddafi said on Saturday he wanted closer energy ties with Russia, shifting the emphasis away from the arms sales which until now have been at the core of their relationship.

Russia is in a three-way race with Europe and the United States to secure lucrative contracts with Libya after it emerged from international isolation by giving up its weapons of mass destruction programme.

In keeping with his tradition on foreign visits, Gaddafi -- who was born into a family of Bedouin herdsmen -- pitched a tent in a Kremlin garden for his visit.

"Unfortunately, in the past our relations have been mainly focused on military and diplomatic contacts and there was virtually no cooperation in civilian sectors," Gaddafi told President Dmitry Medvedev at the start of talks in the Kremlin.

"Libya and Russia are major producers of oil and gas," said Gaddafi, on his first visit to Russia since 1985.

Shokri Ghanem, Libya's top energy official and head of its OPEC delegation, had come to Moscow "so he could discuss coordination with his Russian colleagues", Gaddafi said.

"I believe such cooperation is especially appropriate in the current conditions. Moreover, we are linked by a common vision of energy policy," Gaddafi said, in an apparent reference to the sharp fall in oil prices in the wake of the financial crisis.

RUSSIAN BASE?

Diplomats say Gaddafi's trip to Moscow is intended to counter-balance his fast-expanding relations with the West. U.S Secretary of State Condoleezza Rice went to Tripoli in September for the first such visit in 55 years.

A Russian newspaper reported on Friday that the Libyan leader planned to offer the Russian navy a base in the port of Benghazi, but the two men made no mention of this in public at their meeting on Saturday.

They also gave no details of what form their energy cooperation might take.

Russian gas export monopoly Gazprom (GAZP.MM) has said it wants to participate in a new gas pipeline running under the Mediterranean from Libya to Europe.

State-owned oil major Rosneft (ROSN.MM) and private producer LUKOIL (LKOH.MM) are both keen to invest in energy projects in Libya, which is home to Africa's largest oil reserves and also plans to become a major gas producer.

Libya and Russia are among the 12 member countries of the Forum of Gas Exporting Countries, an organisation which has prompted anxiety among gas consuming countries who fear it could turn in to a "gas OPEC" and drive up prices.

Later on Saturday, Gaddafi is due to meet Vladimir Putin, Russia's powerful prime minister and Medvedev's predecessor as president.

Putin, who at the time was still president, opened a new chapter in relations with Tripoli when he became the first Kremlin leader to visit Libya in April.

To coincide with Putin's visit, the Kremlin wrote off over $4.5 billion of Libyan debt. Libya then promised to match the write-off with contracts for Russian firms, including the purchase of Russian arms.

Russian officials have privately complained that Libya has since failed to deliver on its promises to buy weapons. They said Medvedev and Putin would press Gaddafi on the issue. (Additional reporting by Robin Paxton; Editing by Caroline Drees)

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