Wary of disorder in Libya and Mali, Algerian army targets southern smuggling

* Military paying more attention to Sahel border security

* Over 650 border smugglers captured since last month

By Lamine Chikhi

ALGIERS, May (Reuters) - Fearing armed chaos in neighbouring Libya and renewed conflict in Mali, Algeria's army is shifting focus from fighting Islamist militants at home to the Sahel border smuggling that feeds them in the region.

Since last month, the Algerian military says it has arrested more than 650 suspected smugglers on its borders with Libya, Mali and Niger in a campaign to tighten the largely desolate and trackless desert frontiers with the Sahel to its south.

"Algeria's army is aware that fighting terrorism in the Sahel is useless if you do not include fighting smugglers," security analyst and writer Anis Rahmani said.

Algeria, a major OPEC oil and gas exporter, managed to neutralise an Islamist insurgency only at the cost of thousands of lives in the 1990s and became a seasoned U.S. ally in the fight against Sahel armed factions.

Militant attacks in Algeria are now rare compared with a decade or more ago, but authorities appear to be taking extra precautions against spillover from the worsening disorder in adjacent countries.

Anarchy in Libya, where two rival governments and their ex- rebel allies have fought for control since the fall of Muammar Gaddafi in 2011, has drawn the attention of Algiers and other North African nations to their sprawling, remote border zones.

A relapse into fighting in lawless northern Mali, where separatist and Islamist factions are active, has also worried Bamako's neighbours since French troops withdrew last year after an operation to sweep out al Qaeda-affiliated militants.

Algeria has sent thousands of troops south since it closed more than 6,000 km (3,700 miles) of its borders with Mauritania, Mali, Niger and Libya in May 2014.

But it has stepped up southern operations in the last few months and increased cooperation with Tunisia on its eastern frontier, where militants operate in border mountains.

The southern operation appears focused in part on smashing smuggling networks run by veteran Algerian militant Mokhtar Belmokhtar who heads an alliance of Islamist fighters involved in moving contraband, an Algerian security source said.

Belmokhtar used southern Libya as the springboard for an attack on Algeria's In Amenas gas plant in 2012 during which militants seized foreign oil workers, triggering a siege that left 40 their captives dead.

Some smugglers recently arrested were armed with Kalashnikovs and others served as scouts infiltrating across the Libyan border for armed groups, the security source said.

The army also seized weapons caches near its borders with Libya, the latest in April consisting of two mortars, two rocket launchers, 45 rockets, and 225 kilograms (102 pounds) 0of explosives and landmines, according to the Defence Ministry.

As a sign of the operation's impact, the price of illicit arms, mostly filtered in from Libya to southern Algeria, has risen, the security source said.

ARMS, GASOLINE, FOOD - AND MIGRANTS

Smuggled items included weapons, gasoline, and foodstuffs that are subsidised by the Algerian government.

But migrant trafficking is an especially lucrative trade with militants cashing in on sub-Saharan Africans and Syrians trying to sneak across the border with Libya to make the perilous sea trip from the Libyan Mediterranean coast to Europe.

Earlier last summer, 200 Syrians were seized by Algerian security forces near the border with Libya as they were trying to reach Italy with the help of Libyan Islamists who had promised to smuggle them there by boat.

Although the two main armed groups still active in Algeria, Al Qaeda in the Islamic Maghreb (AQIM) and Islamic State's local wing the Caliphate Soldiers, operate in remote northern areas, Algeria's army has become more concerned about threats to its southern borders.

"Algeria is the only country in the region that has the capacity to effectively patrol its borders," said Geoff Porter, a North Africa specialist at the Combating Terrorism Center at West Point in the United States.

"Even with the presence of foreign troops in northern Mali, Bamako cannot or will not enforce security along its border with Algeria. Likewise, Libya is a failed state that has no interest in border security." (Writing by Patrick Markey; Editing by Mark Heinrich)