Gaddafi visits Russia on arms, energy drive

By Tom Pfeiffer

TRIPOLI (Reuters) - Libyan leader Muammar Gaddafi makes his first visit to post-Soviet Russia on Friday, seeking to deepen a budding energy and military partnership with Moscow and counterbalance his fast-expanding relations with the West.

The visit, Gaddafi's first to Moscow since 1985 according to Russia's Nezavisimaya Gazeta daily, is the latest step in a bold push by the former outcast state to accelerate overseas trade and investment for its booming post-sanctions economy.

Examples of that drive include a rapid expansion of a Libyan state holding in Italian bank Unicredit and a growing list of Libyan deals in Africa and Europe, including a refinery in Egypt and a wheat farming agreement in Ukraine.

"Libya wants to increase its overseas exposure and is showing a surprising sophistication about it, given their years of isolation," said Geoff Porter, an analyst at Eurasia Group.

Arms and energy are the focus of the three-day trip. Gaddafi will meet President Dmitry Medvedev six months after welcoming his predecessor and current Prime Minister Vladimir Putin on the first visit by a Kremlin leader to Libya since 1985.

Russia's Interfax news agency said Libya might agree to buy more than $2 billion worth of Russian weapons during the visit, reviving part of a Cold War-era relationship that saw Moscow arming much of Libya's military.

Libya is interested in buying surface-to-air missiles, fighter aircraft, dozens of helicopters and about 50 tanks, Interfax quoted a source in Russia's arms industry as saying.

Moscow also is seeking rich energy contracts in Libya, owner of Africa's largest oil reserves, and state gas monopoly Gazprom is showing interest in taking part in the construction of a new gas pipeline linking Libya and Europe.

INVESTMENT RUSH

The North African country aims to become a big gas producer and expand production to 3 billion cubic feet per day (bcfd) by 2010, with a potential for 3.8 bcfd by 2015 versus 2.7 bcfd now.

In April, Libya and Russia signed agreements on debt, energy, railways and investment, marking a renewed effort by Moscow to compete in a market aggressively contested by Western and Asian companies seeking state infrastructure projects.

Libya has seen a foreign investment rush since 2003, when the U.N. Security Council lifted more than a decade of sanctions imposed for what the West called Libyan support of terrorism.

But at least in public, politics may get equal billing with business, analysts said, noting Gaddafi told Putin in April that the world needed a Russian "superpower" to counter an unbalanced international system -- a reference to U.S. global power.

Russian Foreign Minister Sergei Lavrov said last week "the aim of the visit is to develop bilateral relations and exchange views on regional problems which are of mutual interest."

"Clearly the Russians have been courting Libya on energy, and so you'll have some pipeline politics on this trip, but you'll also have the Gaddafi world view," said Jon Marks, editorial director of industry newsletter Africa Energy.

"Gaddafi sees a multipolar world and he sees the Russians willing to play. This trip shows he's needed and loved," said Marks, noting Libya's drive for influence in Africa and the Arab world had not always lived up to Gaddafi's hopes.

Last month, U.S. Secretary of State Condoleezza Rice met Gaddafi in Libya, the first such visit in 55 years, in a move to end years of enmity. But there are no plans as yet for a meeting with U.S. President George W. Bush or his successor.

"It was a historic moment, but it's clear that as far as ties to the U.S. are concerned, there's not going to be a leader-to-leader meeting," Marks said.

WASHINGTON NOT TROUBLED

The United States is not troubled by Gaddafi's trip, noted a diplomat with deep knowledge of Libyan thinking, saying Tripoli told Washington about it well in advance and that senior Libyan officials see their interests as more allied with the West.

"Basically, there is contained enthusiasm for this there. It's one of those things they feel they must do but they are not all that keen on it," said the diplomat, who spoke on condition that he not be identified.

The diplomat said the Libyans now saw Europe and the United States as more natural partners, were nervous about what he called the "economic aggrandizement of the Putin regime" and hoped, ultimately, to buy weapons from the West as well.

"They feel the Russians, who have long been their preferred providers of military equipment, gouged them on prices (in the past) ... and they don't like to be taken for a ride," he said. "What they would like to do is develop military trade with the West in order to be able to get better equipment but also to get more competitive prices (from) a diversity of suppliers."

(Additional reporting by William Maclean; Editing by John O'Callaghan)