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Italy trying to rebuild energy ties with new regime in post Gadaffi Libya

By By Eric J. Lyman (Xinhua)

10:13, August 26, 2011

ROME, Aug. 25 (Xinhua) -- Italy was at times a reluctant partner in the North Atlantic Treaty Organization-sponsored military mission in Libya, but as the conflict there draws to a close, Italy is among the first to re-establish oil and natural gas ties with the war-torn North African nation.

As Libya's former colonial ruler, Italy enjoyed strong economic ties with the North African country and was its top trade partner before mid-February when the riots began.

The two countries had a mutual non-aggression pact until Italy annulled it in February at the urging of the NATO coalition partners. The countries also had billions invested in each other's economies, and Italy was for years the largest customer for Libyan oil and natural gas.

Even when foreign countries began to get involved as the conflict in Libya spread, Italy was reluctant, voting only under pressure to allow for Italian air bases to be used as a starting point for the NATO flyovers.

When Italy became embroiled in a political crisis in May and June, the second largest party in the ruling government coalition - the Northern League - agreed to continue its support only on the condition that Italy take steps to limit its role in Libya.

But now that the conflict is over, Italy sees itself playing more of a leadership role.

On Thursday, Mahmoud Jibril of Libya's rebel-led Transitional National Council was in Rome to meet with Italian Prime Minister Silvio Berlusconi, just hours after Italian officials in Tripoli successfully negotiated the release of four Italian journalists that had been held there.

Italy also announced Thursday it would do its part in unfreezing Libyan assets frozen earlier this year. This came the day after the United States introduced a resolution in the United Nations to unfreeze at least 1.5 billion U.S. dollars in Libyan assets held around the world to be used for humanitarian needs.

The meeting between Jibril and Berlusconi was particularly eventful: Berlusconi promised to provide 350 million euros in aid to Libya's interim government, while Italian energy giant Eni promised to provide oil and natural gas for immediate needs of the local population.

Of course, all of that is -- at least partly -- in the hope of re-establishing the oil and natural gas supply going the other way, from Libya to Italy. Eni chief executive Paolo Scaroni said Thursday that the pledge to provide oil and natural gas to Libya was best seen as a down payment on future access.

"We found a solution by delivering gas and fuel for the population in advance," Scaroni said. "We will get future payment in oil once the Libyan oil fields are functioning again."

Before the conflict started, Italy received around 25 percent of its oil and some a 10th of its gas from Libya, and replacing all that energy has not been easy.

Eni and other companies were forced to bid against established buyers in energy markets, and to rely on more expensive suppliers, pushing energy prices higher during what was already a severe economic crisis.

Scaroni said Eni expected Libyan oil and natural gas output to start up again within six months, and to approach pre-conflict levels within 18 months.

The Libya's rebel Transitional National Council has said it would honor all contracts signed with the previous government, but that it might take some time before the volume of the country's output would be enough to honor all contracts.

Italy's steps in recent days are meant to assure that when supply does start, Italy will be near the front of the line.

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