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. Last Updated: 07/27/2016

$4.5Bln Debt Deal Crowns Libya Trip

APGadhafi greeting Putin and the end of his two-day visit Thursday in Tripoli.
President Vladimir Putin on Thursday oversaw the writing off of $ 4.5 billion of Libya's Soviet-era debt in return for securing multibillion-dollar contracts for state corporations with the North African country.

The widely heralded deal, which annuls all of Libya's Soviet-era debts, was one of 10 trade, investment and political agreements reached during Putin's visit, one of his last as president and the first by a Kremlin leader to the OPEC member country since 1985.

Gazprom signed a memorandum of cooperation to set up a joint venture with Libya's state oil company, while Russian Railways president Vladimir Yakunin signed the single biggest contract worth 2.2 billion euros ($3.5 billion) to build a 550-kilometer rail line linking the cities of Sirte and Benghazi.

The joint venture will work in all spheres of oil and gas exploration, Gazprom CEO Alexei Miller told journalists in Tripoli, Interfax reported. Libya, a former international outcast, sits on Africa's biggest oil reserves.

In the next few days the two countries will also sign a contract worth several hundred million dollars, under which Russia will modernize some weaponry it sold previously to Libya, Reuters reported, citing a defense source.

Interfax had reported Monday that Moscow hoped to sell Tripoli anti-aircraft systems, jet fighters, helicopters and warships worth 2.5 billion euros ($4 billion).

Putin told reporters that "the deal will not only employ Russian defense enterprises but will also help strengthen Libya's defenses," Interfax reported.

"I am satisfied with the way we have solved the debt problem, I am convinced we found a plan that will benefit both the Russian and Libyan economies and the Russian and Libyan people," he said, Interfax reported.

Finance Minister Alexei Kudrin, accompanying Putin on the trip, said the debt would be canceled as soon as Russian companies had received payments for the new contracts.

Libyan leader Moammar Gadhafi told Putin that he welcomed the idea of creating an OPEC-style gas cartel, the country's official Jana news agency reported.

"I think gas-producing countries have begun to respond to this idea … and consultations will start between us to realize it," Gadhafi was quoted as saying at a dinner for Putin on Wednesday evening.

The world's major gas-producing nations are undecided about whether to turn the current informal group, the Gas Exporting Countries' Forum, into a more formal organization with an OPEC-style charter.

Putin has said he views the idea of a gas OPEC as "interesting" but has not given formal backing to the proposal. The forum's next meeting is in Moscow in June.

The United States and the European Union have repeatedly warned that a gas cartel would pose a serious danger to global energy security and create room for price manipulation.

Western companies are courting Libya, whose oil and gas industries earned it more than $40 billion in 2007 and are seeking contracts working on large state infrastructure projects.

Gazprom obtained an upstream foothold in Libya when it acquired four offshore exploration licenses in 2006. The company acquired another three licenses in the country in December 2007.

Russia is eager to deepen energy ties, as Western and Asian companies have snapped up the bulk of the country's oil and gas ventures in recent years.

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

Russia's trade with Libya is currently worth about $200 million per year, a fraction of the $1 billion annual trade in the 1980s.