"The Libyan leadership confirmed its interest in acquiring high-quality products from the Russian defence industry," Russian Prime Minister Vladimir Putin was quoted as saying by Interfax and ITAR-TASS after a meeting with Libyan Prime Minister Baghdadi Mahmudi.

"We reached agreement on concrete steps that will enable strengthening of the Libyan armed forces thanks to bilateral cooperation," the Libyan prime minister said.

Quoted by RIA Novosti, the Libyan premier also said: "We are working on the project of creating a nuclear power plant, to be used for electricity generation."

A Russian defence ministry source, quoted by Interfax, said Tripoli was interested in buying Russian surface-to-air missiles, tanks, helicopters and fighter jets with a total value over two billion dollars (1.3 billion euros).

In April during a visit to Libya by Putin, Russia's president at the time, Moscow agreed to cancel billions of dollars of Libyan Soviet-era debt in exchange for multi-billion-dollar contracts with Russian companies.

On Thursday the two prime ministers also discussed cooperation in the oil and gas sectors between their petroleum-rich countries.

The Libyan premier said Tripoli had established a "special relationship" with Russian gas giant Gazprom, which has been in talks to develop gas projects in Libya, Interfax reported.

Gazprom has signed a cooperation agreement with Libya's national energy company, while Russia's rail monopoly, Russian Railways, also signed a 2.2 billion euro contract to build a 600-kilometre (370-mile) railway line connecting the Libyan cities of Surt and Benghazi.

At Thursday's meeting, Mahmudi invited Putin to Libya in August for a ceremony marking the start of the railway's construction.

Putin also thanked Mahmudi for Tripoli's decision to release an official of Lukoil, Russia's second-largest oil company, who had been detained in Libya since November 2007.

Lukoil said in a statement Thursday that Alexander Tsygankov, head of its Libya office, had returned to Moscow after being held for eight months without charges.

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