* Agreement could boost trade, curb illegal migrants
* Libya a lucrative source of revenue for EU firms
* Bloc soon to open first embassy in Tripoli
* EU-Libya spat over visas now resolved
By Salah Sarrar
TRIPOLI, May 11 (Reuters) - Officials from the European Union and Libya said they were on track to sign their first cooperation pact this year, cementing ties that bring EU countries lucrative trade and help control illegal immigration.
The EU lifted sanctions on energy exporter Libya in 2004 after the country’s leader, Muammar Gaddafi, renounced illegal weapons programmes, but the bloc still has no formal relations and no representative mission in Libya.
Diplomatic ties suffered a setback earlier this year when Tripoli, angered that Switzerland was barring entry to senior Libyans including members of Gaddafi’s family, stopped issuing visas to most Europeans, but that row has since been resolved.
The so-called Association Agreement under negotiation between Libya and the EU will create a legal framework which could eventually lead to free trade and more cooperation on stemming the flow of illegal migrants from Africa to Europe.
“Some chapters related to trade are still under discussion and probably the agreement will be signed before the end of this year,” Mohamed Siala, Secretary for Cooperation at the Libyan Foreign Ministry, told Reuters.
An EU envoy said the next round of talks on the agreement would be early next month. “We hope to finalize it maybe by the end of the year,” said Adrianus Koetsenruijter, head of the bloc’s delegation to neighbouring Tunisia.
The ambassador also told Reuters the EU would for the first time set up a diplomatic mission in Libya, and that he expected it to be open before the end of the year.
“Since we have started to establish for the first time relations between the EU and Libya, we need to have a presence on the spot, an embassy in fact of the EU,” he said.
“That always takes a bit of time to decide but I just finalised an agreement on establishing such an office here,” he said on a visit to the Libyan capital.
Energy exporter Libya has become a major source of revenue for European firms. For a factbox on EU-Libyan trade ties, click on [ID:nLDE61G1MR]
Libya's sovereign wealth fund has invested in European companies, with a focus on former colonial power Italy. It has a stake in Italy's second biggest bank, Unicredit CRDI.MI and a small share in carmaker Fiat FIA.MI.
EU states and especially Italy also rely on Libya’s police and coastguard to apprehend migrants, most of them from sub-Saharan Africa, who try in large numbers to cross the Mediterranean and enter Europe illegally.
Libya’s decision to stop issuing visas to most European citizens was linked to a row with Switzerland that began in 2008 when Gaddafi’s son Hannibal was arrested in Geneva on charges -- which were later dropped -- of mistreating two employees.
Tripoli started issuing visas again after the EU lifted travel restrictions on Libyans and expressed its regret over the affair. Libya’s Foreign Minister said after the EU’s climb-down that ties were back to normal. [ID:nLDE62R05C] (Editing by Christian Lowe and Giles Elgood)