LIBYA is sitting on a stockpile of almost 200 barrels of uranium despite agreeing in 2003 to dismantle its nuclear program.

The revelation that Libya has not yet complied with the international agreement to get rid of its supply of uranium will be a particular blow to the French President, Nicolas Sarkozy, after his recent move to deepen ties with the regime of Muammar Gaddafi.

It is also an embarrassment to France’s first lady, Cecilia Sarkozy, who went to Libya last month to help negotiate the release of six Bulgarian and Palestinian medical staff accused of infecting children with HIV.

Within days of that visit, France signed a memorandum with Libya involving the possible construction of a nuclear reactor for civilian purposes.

The uranium, in the form of 1000 tonnes of yellowcake ore, is being stored at a military base in the desert town of Sabha.

Nuclear experts with knowledge of the stockpile estimate its value at around $480 million.

The Sabha base was linked with Libya’s nuclear weapons program in a report by the International Atomic Energy Agency in 2004. The base, some of which is believed to be underground, was also alleged to have been a chemical weapons plant.

After Colonel Gaddafi officially abandoned Libya’s nuclear weapons program in December 2003 in return for the lifting of US and European sanctions, the agency was supposed to oversee the country’s disposal of its uranium. A source close to the situation said: “Gaddafi has gone through the pro forma process with the IAEA but he has delayed and delayed. He wants to use the uranium as a bargaining chip to get a reactor.”

However, some nuclear experts believe Colonel Gaddafi is very unlikely to be allowed to have a nuclear reactor, even if it is used for civilian purposes, because of fears Libya could restart its military nuclear program. The US, Britain and other agency members do not believe Libya should be given nuclear expertise, sources said, and are likely to block France’s attempt to strike a deal with Colonel Gaddafi.

Questions might also be asked about how Libya came to possess the uranium. Insiders believe it was mined in Niger and acquired during the period of sanctions.

If France were to strike a deal with Libya, the work would almost certainly be done by Areva, the world’s largest nuclear company. Such companies are increasingly dealing with authorities once blacklisted as places where nuclear technology should not be allowed.