KIEV, Oct 2, 2008 (AFP) - The pirate hijacking of a Ukrainian cargo ship loaded with tanks off Somalia has refocused attention on arms-trafficking by the former Soviet republic, one of the world's 10 biggest arms exporters.

Experts say Ukraine has greatly improved arms-export controls after a string of scandals but remains a potential source of weapons for pariah states and rebel groups worldwide, in an embarrassment to Kiev's pro-West government.

'Ukraine has made significant steps in recent years towards improving its control over arms exports,' Paul Holtom, an expert with the Stockholm International Peace Research Institute (SIPRI), said in a statement this week.

'But if it wants to be regarded as a responsible arms exporter, it needs to be confident that these arms will not be diverted to rebel groups for use in conflict.'

Controversy erupted over Ukraine's arms export business Monday when the US Navy charged that the T-72 tanks aboard the MV Faina, the ship seized by Somali pirates, were headed for Sudan rather than Kenya as initially believed.

Both Ukraine and Kenya denied the allegation, but the pirates themselves -- who are demanding 20 million dollars in ransom amid a standoff with US Navy warships -- said the tanks were destined for rebels in southern Sudan.

Turning up the heat, Ukrainian Prime Minister Yulia Tymoshenko acknowledged Wednesday that 'illegal arms sales... unfortunately take place in Ukraine today,' quoted by Interfax news agency.

Ukraine produced about 30 percent of Soviet arms before gaining independence in 1991, when it inherited a huge Soviet-era arsenal and numerous weapons-production facilities including factories that manufacture tanks.

Ukraine was the world's 10th biggest arms exporter in the period from 2003 to 2007, according to SIPRI.

About half its arms sales go to the Commonwealth of Independent States (the former Soviet Union minus the Baltic states), 30 percent to southeast Asia and Africa and six percent to the Middle East, said Ukrainian analyst Mykhailo Samus.

In 2007, Ukraine earned 1.2 billion dollars (850 million euros) from weapons deals with 20 countries, up from one billion dollars in 2006, said Samus, a defence analyst at the Kiev-based Centre for Army Conversion and Disarmament Studies.

Exports include tanks, combat aircraft, artillery systems and missiles as well as arms-related services, Samus said.

But those impressive figures are tarnished by several scandals over alleged arms sales to unscrupulous regimes.

The best-known scandal came in 2002 when the United States accused Ukraine of selling advanced military radar systems to Iraq in violation of sanctions against Saddam Hussein's government.

The radar sales to Iraq were never proven but Ukrainian President Viktor Yushchenko later said his predecessor, Leonid Kuchma, had sold missiles to Iran and China in 2001 under a false contract that listed Russia as the destination.

Ukrainian arms sales to Liberia in the 1990s, mainly via Burkina Faso, have been alleged in the war crimes trial of former Liberian president Charles Taylor in the Hague-based Special Court for Sierra Leona.

Ukrainian defence analysts say the 'wild period' of the 1990s is over.

'Today the Ukrainian arms-export control system is one of the best in the world,' Samus said, adding that the United States and European Union had helped improve it following the Iraq radars scandal.

The scandal sparked by the pirates 'has signs of improper competition,' said analyst Olexi Melnik, suggesting that rivals had spread false allegations about the cargo's destination to hurt Ukraine's reputation on the global arms market.

Still, not everyone is convinced. In its statement SIPRI called on Ukraine to do more 'in trying to shake off its post-Cold War image as an irresponsible arms exporter.'