* No significant arrests made three months after attacks
* US inquiry finds security at Benghazi mission was poor
* Armed militias more powerful than weak security forces
* Benghazi cradle of Libyan revolt, now violence hotspot
By Marie-Louise Gumuchian and Hadeel Al Shalchi and Ghaith Shennib
TRIPOLI/BENGHAZI, Libya, Dec 19 (Reuters) - A Libyan reluctance to crack down on suspected Islamist groups behind the deadly attack on the U.S. Benghazi mission highlights the failure of police and courts to stamp their authority and may open the way for militants to strengthen their grip.
The Sept. 11 assault, in which U.S. Ambassador Christopher Stevens and three other Americans were killed, was the most high profile attack in post-war Libya and yet no significant arrests have been made and witnesses say they have yet to be questioned.
In a scathing assessment released on Tuesday, an official U.S. inquiry determined that security at the mission in eastern Libya was inadequate to deal with the attack and that there was little evidence militia guards alerted Americans to the assault or swiftly summoned reinforcements once it was under way.
The five-member inquiry board found that Libyan guards were "poorly skilled", that U.S. intelligence provided no "specific tactical warning" of the attack, and that there was "little understanding of militias in Benghazi and the threat they posed to U.S. interests" in the eastern Libyan city.
In a country where armed militias wield the real power on the ground, some say it is too difficult for the weak state armed forces to move against these groups and there is no real desire to dig too deep for fear of setting off reprisals.
Seeking justice remains a tough task in the oil-producing North African state, where authorities - overwhelmed without an effective army or police force at their disposal - have little power to protect citizens or confront criminal suspects.
"They are afraid and they don't have the power to face these people, who could just get stronger and stronger," an official from Libya's former interim leadership said.
"Security is the priority, and what is holding everything back. It just hasn't been faced properly."
A year after the overthrow of Muammar Gaddafi, the legacy of four decades of one-man rule - when many formal institutions of statehood withered - and of the popular uprising that killed him, is an anarchic swarm of militias that provide both what passes for official security and poses the main threat to it.
ATTACK ON SEPT. 11 ANNIVERSARY
U.S. and Libyan officials have pledged to hunt down the gunmen who attacked the U.S. diplomatic mission and a CIA annex in Benghazi in the night of the 11th anniversary of the Sept. 11, 2001 attacks on New York and Washington by al Qaeda.
The incident has raised questions about the adequacy of security at U.S. embassies around the globe and where to draw the line between protecting American diplomats in dangerous places and giving them enough freedom to do their jobs.
U.S. intelligence officials say militants with ties to al Qaeda affiliates were likely involved in the Benghazi attack and witnesses say members of the Islamist Ansar al-Shariah group were at the scene.
The group, which has denied involvement, was swept out of its Benghazi bases shortly after the attack by a mob of pro-government demonstrators angry at the might of militia groups.
Days after the attacks, Libyan officials said eight people had been detained and around 50 were "wanted for investigation". The eight turned out to be only looters, some officials said.
"The state of the investigation ... reflects the problem of the paralysis of investigative capacity of Libyan security forces," Claudia Gazzini of the International Crisis Group said.
"This is generally linked to the lack of security and also to threats directly made against prosecutors and judges."
Libya has insisted it will lead the investigation but one U.S. official i n Washington familiar with the inquiry described it as "a joke": "(There is) no real progress that we can see."
Another offered a more tempered view. "It has been inherently challenging considering the nature of the crime and the region of the world."
FBI agents went to Benghazi in October to analyse the crime scene but have since remained in Tripoli because of security concerns. In an effort to generate leads, the FBI has put out a poster asking for information.
So far, a Tunisian is under investigation in Tunisia, having been deported from Turkey, and Egyptian authorities are holding one man whose group is suspected of links to the attack.
In Libya, some witnesses say they have yet to be questioned.
A Libyan militia commander, Ahmed Abu Khattala, who U.S. officials said they would want to question i n connection with the attacks, said he was present during the incident but was not one of the ringleaders. A Libyan official said there was not enough evidence to arrest him.
"Until now nobody has approached me (as part of the investigation)," Abu Khattala told Reuters.
Abdelsalam al-Barghathi, a commander overseeing the security reaction on the night, also said earlier this month he had yet to be questioned. "I am surprised that no one asked me about what happened that day."
A Libyan security source initially involved in the investigation said he quickly decided to step down. "Who was going to protect me if we carried out the investigation honestly?" he said.
"Benghazi is a small place, everyone knows everyone and those people with the kind of weapons used during the attack are well-known in the community. The probe was going to lead to them but we were not given guarantees of protection."
The chain of command of the investigation was passed from one senior judicial official to another in Benghazi before Libya's prosecutor general in Tripoli transferred the case to the capital. "It is a serious investigation," an official from his office said.
A security committee in the national assembly is playing a supervisory role. "It is a very important issue. We hope it will be resolved as soon as possible," said panel member Mohammed Bitro. "Libya has changed; to discover the truth you need time."
NO ONE IMMUNE
Benghazi, Libya's second biggest city, was where the anti-Gaddafi uprising broke out but it is now a hot spot for violence, riven with armed factions. Last month, Benghazi's police chief was shot dead, the latest in a series of killings.
In a rare example of security forces flexing their muscles, police said two arrests were made over recent assassinations of security officials. But ensuing attacks on police stations underline the scale of the challenge facing them.
"Some in the West believe the authorities are negligent in carrying out the investigation. They aren't. They just do not have the strength and the experience to solve such a dilemma," Younis Najim, a Benghazi civil society activist, said.
"The suspects are free and known but each have their own security brigade for protection. The police are not strong enough to declare war on them, but the people are on the police's side."
With Libyan courts still shaky and thousands of people still in detention from last year's war, rights groups have identified armed militias as one of the biggest challenges to stability.
The Tripoli government has taken a twin-track approach, saying it would shut down rogue groups but licensing many of the most powerful armed brigades on which it relies to help enforce law and order. But this step appears to have done little to enhance security or central state authority.
"The groups have territories, independent sources of income, they have political bases, and they have military capabilities," said Geoff Porter of North Africa Risk Consulting. "The central government has been compelled to accommodate them in some instances and to ignore them or avoid them in others." (Additional reporting by Ali Shuaib in Tripoli; Mark Hosenball and Tabassum Zakaria in Washington; Writing by Marie-Louise Gumuchian; Editing by Mark Heinrich)