* France closely following talks on sale of 60 Rafale to UAE
* President Sarkozy pleased with progress of the talks
* Dassault Aviation shares up 1.1 percent
(Adds background, details, quotes)
By Matthias Blamont
PARIS, June 19 (Reuters) - France hailed progress on Friday towards what could be the first sale of Dassault Aviation's Rafale fighter jets to a foreign buyer after the United Arab Emirates signalled it was seriously interested in the aircraft.
Military authorities in the Gulf state have officially told France the specifications it requires of the plane, marking a step forward in what would be one of the biggest French defence contracts in years.
However, people close to the matter told Reuters that discussions between the parties could go on for "several months" before any final decision is taken and the Rafale is likely to face strong competition from rival U.S. bids.
The Rafale, Dassault Aviation's newest multirole combat aircraft, has been a flagship programme for France's arms industry but has had problems in finding export buyers, despite major efforts by French authorities.
Friday's move by the UAE was welcomed by the Elysee Palace, which has seen several potential Rafale deals lost in recent years and which has been following the UAE talks closely.
President Nicolas Sarkozy, who opened a French military base in Abu Dhabi this year and who has set up a special unit at the Elysee to support the Rafale, said the deal was moving ahead "significantly" but did not say when he expected a decision.
"It's progressing, they've given us all the technical specifications they expect of the Rafale," he told a press conference in Brussels where he had been attending a European Union summit. "It's a very important subject for France."
The UAE wish-list includes a 20 percent boost in thrust for the twin-engine plane, which competitors say is under-powered, and engine maker Safran has agreed to study this.
COMPETITION
Analysts calculate that the sale of 60 Rafale aircraft, which are currently only deployed by the French military, could be worth between 6-8 billion euros and Dassault Aviation shares were up 1.1 percent at 395 euros by 1325 GMT.
Dassault has declined to confirm the figures but has said an agreement may be reached this year.
A spokesman said on Friday it was pleased "that the talks between our company and the Emirates authorities are progressing. We are attentive to the demands of the client".
The UAE state news agency said the date of any deal would "be set based on the results of the financial negotiations.".
According to people familiar with the deal, these negotiations are likely to be long and complicated and would also include the possibility of buying back old Mirage combat jets from the UAE or selling them on to another buyer.
"That's a variable which could change the total price of the operation. The Dassault teams don't want the face value of the contract to go down," one source said.
One other person close to the deal, who spoke on condition of anonymity, said Dassault would have to expect fierce competition from its U.S. rivals Lockheed Martin and Boeing.
Despite the upbeat comments, one industry observer said the French statement could mask some disappointment that a deal had not been struck in time for the Paris Air Show this week.
"The message is, air show over, see you in Dubai," he said, referring to the Nov. 15-19 Dubai Air Show.
Beyond the deal itself, France hopes an export win for the Rafale could lead to other deals, notably in the Gulf, where Qatar and Kuwait could follow if the UAE takes the first step. (Additional reporting by Benoit Van Overstraeten, Tim Hepher, Dominique Vidalon, Cyril Altmeyer; Writing by James Mackenzie)