Russia's Putin targets contracts on Libya trip

Putin, who quits on May 7 to become a prime minister to his loyal successor Dmitry Medvedev, shook hands with Gaddafi in front of his former central Tripoli home, which has been kept in ruins since it was bombed by U.S. aircraft in 1986. Â

The U.S. strike, which killed about 40 people, marked one of the lowest points in the decades the OPEC member country spent being seen as an outlaw state that supported terrorism.

"I bring my tribute to the victims. We share your grief," Putin wrote in the guest book.

Putin, on the first visit by a Kremlin leader since 1985, later began talks with Gaddafi in a tent in the grounds of a compound surrounding the building. Putin is expected to oversee the signing of deals worth about $10 billion, an official said.

"The main point of the visit is to compensate for losses our bilateral relations suffered during the sanctions, which we observed strictly in contrast with some Western competitors," a Kremlin spokesman, Dmitry Peskov, said.

Libya, whose oil and gas riches earned it more than $40 billion in 2007, is now aggressively courted by Western companies seeking contracts from big state infrastructure projects aimed at modernising Libya's rundown public services.

Visits to Tripoli last year by then British Prime Minister Tony Blair and French President Nicolas Sarkozy and a 2004 trip by then German Chancellor Gerhard Schroeder were crowned with large contracts for their countries' respective companies.

Russia's bid is helped by what analysts see as Gaddafi's desire to balance growing political and economic ties with the West with alternative sources of support such as Moscow. That offers a limited window of opportunity for Russia, seeking to revive its role as a global power, which diminished after the Soviet Union collapsed.

"Russia plays the role of a foil to the United States, which remains the major power," Alexander Kliment of Eurasia Group consultants told Reuters.

Libya's ties to the West have warmed since it abandoned its weapons of mass destruction programmes in 2003, prompting the removal of most international sanctions.

"Gaddafi once said his love affair with the Soviet Union had failed to materialise in a marriage," one Russian official said. "Perhaps it is time to try a marriage of convenience."

GROWING TIES

Putin and Gaddafi on Thursday will oversee the signing of a political declaration, various commercial deals and an accord on investment guarantees, according to the Russian officials.

Russia's trade with Libya is worth about $200 million a year now, a fraction of the $1 billion in Soviet era exchanges, but energy firms are already laying the basis for further expansion.

In the past two years, Tatneft and Gazprom have won permits to explore in Libya, which has Africa's biggest oil reserves. Among other deals in the offing, Russia's Stroitransgaz company is seeking a contract to build a gas pipeline network on Libya's Mediterranean coast.Â

U.S. forces bombed Tripoli and Benghazi in the early hours of April 15, 1986. Then President Ronald Reagan said it was in retaliation for what he called Libyan complicity in the bombing of a discotheque in Berlin a month earlier in which three people, including a U.S. serviceman, were killed.