Chinese arms firms offered to sell weapons worth about $200 million to Libyan leader Moammar Gadhafi's beleaguered forces in July, two newspapers reported, compounding pressure on Beijing's brittle ties with the rebels who have ousted him.
Rebel forces control most of the oil-rich North African nation and are already setting up a new government, but Gadhafi and his staunchest allies remain on the run and enjoy support in several central and southern areas, including the desert town of Bani Walid and the fugitive leader's hometown of Sirte.
Forces of the National Transition Council (NTC) were poised for an assault on Bani Walid after negotiators failed to persuade Gadhafi loyalists to abandon the town.
Many have speculated that Gadhafi is hiding somewhere around Sirte, Bani Walid or the loyalist town of Sabha, deep in the Libyan desert. He and his son Seif al-Islam have tried to rally supporters in defiant audio recordings broadcast on the Syrian-based Al-Rai television station but no concrete information about their whereabouts has emerged.
Sense of normality in capital
In Tripoli, life has started returning to normal after last month's fighting and a Muslim holiday last week. Traffic has become heavy as fuel supplies improved. Cafes are busy and offices have begun opening.
Officials with the NTC have announced plans to bring their heavily armed fighters under control and try to integrate thousands of them into the police force and find jobs for others.
Officials said there would also be retraining and reintegration schemes for those who fought for Gadhafi.
The disintegration of Gadhafi's rule after a six-month war has left a security vacuum in Libya, with no state security forces. There are also large numbers former rebel fighters who are not part of any formal structure, and huge quantities of unsecured weapons.
Chinese link to Libyan arms sales?
Following newspaper, abandoned in the Libyan capital, Tripoli, indicated that Chinese companies offered to sell rocket launchers, anti-tank missiles and other arms to Gadhafi's forces, despite bans on such sales.
"We have hard evidence of deals going on between China and Gadhafi, and we have all the documents to prove it," a rebel military spokesman, Abdulrahman Busin, told the Times.
But some officials told the Times that they were skeptical or uncertain.
A "senior NATO diplomat in Brussels discounted the report as highly unlikely," and members of a United Nations overseeing sanctions on Libya said "nothing about arms dealings with China had been brought to their attention," said the Times report.
China's Foreign Ministry said that members of Gadhafi's government had come to China and held talks with a "handful" of Chinese arms companies without the knowledge of the government.
"After the passing of resolution 1970 by the Security Council, we notified relevant government departments to strictly implement it," ministry spokeswoman Jiang Yu told a regular news briefing in Beijing.
"The Chinese companies did not sign arms trade contacts and nor did they export military items to Libya," Jiang said. "I believe that the agencies in charge of the arms trade will certainly treat this seriously."
Even if the arms were not delivered, or the cited documents turn out to have no foundation, the controversy could intensify mistrust between Beijing and the rebels seeking to defeat Gadhafi's shrinking forces and claim control of all Libya.
Report: Western agencies colluded with Gadhafi
On Monday, that documents found in Tripoli since the rebels seized the city indicate that Gadhafi's security services collaborated with Western intelligence agencies in mounting "rendition" operations against terrorism suspects.
The Guardian report said that a CIA document discovered in an abandoned office building showed that British intelligence services worked with the Libyans to arrange for a terrorism suspect and his family to be taken from Hong Kong to Tripoli despite the possibility he would be tortured in Libya.
The newspaper reported that other documents found in the building suggested a closer working relationship between Western intelligence agencies and Gadhafi's regime than had been previously disclosed. Britain’s MI6, the Guardian said, was involved "in a number" of American-led operations that ended with Islamists sent to Gadhafi's prisons.
The documents were discovered by New York-based Human Rights Watch, the Guardian said.
Signs of division
After chasing out Gadhafi from his Tripoli compound last month, Libya's new rulers are trying to control the entire country and restore normality.
But in an early sign of divisions, Ismail al-Salabi, a Libyan Islamist military commander who fought Gadhafi's forces called on the interim cabinet to resign because they were "remnants of the old regime."
A spokesman for Gadhafi, who has been in hiding since his foes seized Tripoli on Aug. 23, has dismissed talk of surrender and said powerful tribal leaders were still loyal to him.
"He's in the country," Moussa Ibrahim told Reuters Friday in a call from an undisclosed location. "He's in a safe place surrounded by many people who are prepared to protect him.
Tribal elders from Bani Walid had come out to negotiate after NTC spokesmen said several times over the previous day that talks were over and they were about to attack.
There has been speculation from NTC officials that members of Gadhafi's family, perhaps even the former Libyan leader himself, may be hiding there.
No comment was available from the other side.
NATO, meanwhile, reported bombing a military barracks, a police camp and several other targets near the coastal stronghold of Sirte overnight, as well as targets near Hun, a possible staging ground in the desert halfway between Sirte and Sabha, in the south. It also reported bombing an ammunition storage facility near Bani Walid.
NATO has been bombing Gadhafi's forces since March under a United Nations mandate to protect Libyan civilians. But that mandate expires on Sept. 27, and the rebels may be anxious to end the fight before it runs out — since it may be politically difficult to get it renewed.