Libya signs arms deal with French firms - source

TRIPOLI, Aug 3 (Reuters) Libya signed contracts with French firms for military equipment, the first arms deals with a Western country since the 2004 lifting of an international weapons embargo, a Libyan source said.

The contracts were worth a total of 296 million euros (402 million dollar), said the source. One deal for 168 million euros was for Milan anti-tank missiles and the other for 128 million euros was for communications systems.

The contract for the Tetra communication system was signed with EADS, jointly controlled by French and German interests, while the missile deal was signed with the MBDA company, the missiles affiliate of EADS, the source said yesterday.

The Milan is a portable, medium-range anti-tank weapon.

On Wednesday, the son of Libyan leader Muammar Gaddafi was quoted as saying by French newspaper Le Monde that France had agreed to sell anti-tank missiles to Libya as part of a broader military agreement.

French President Nicolas Sarkozy clinched an accord on defence and signed a memorandum of understanding for a nuclear energy deal when he visited Tripoli last week, after helping to free foreign medics imprisoned in Libya.

But he denied on Wednesday the release of the medics was secured by an arms agreement. Answering questions from journalists as to what deal had been offered by France, he said: ''None.'' The European Union lifted an arms embargo on Libya in October 2004, but Gaddafi's son, Saif al-Islam, said the ban had effectively remained in place, blaming the Germans for putting the brakes on possible deals.

Sarkozy flew to Libya hours after helping to secure the release of six foreign medics held in jail for eight years for allegedly infecting Libyan children with HIV.

Libya started emerging from international isolation in 2003 when it agreed to halt a weapons programme prohibited by the United Nations and pay compensation for the bombing of a US airliner over Scotland in 1988 in which 270 people were killed.

REUTERS RJ BD1037