Relations between Libya and Italy are on their way to normalization again after Italian Prime Minister Mario Monti and the chairman of the Libyan Transitional National Council Mustafa Abdul Jalil agreed to revive a “friendship treaty” between the two countries.

We have decided to reactivate the friendship treaty, which had been suspended, and we have re-examined concrete ways of concentrating on the priorities of the new Libya, said Monti.

Monti, who reportedly plans to visit Tripoli next month, met with Jalil in Rome. The Italian leader also said that banks will continue to unfreeze Libyan assets in their possession.

According to media reports, Italian financial institutions have already released about 600-million euros ($782-million) of such assets.

Jalil, who also met with Italian President Giorgio Napolitano, said these funds will be used to repay debts to Italian companies.

Jalil added that Italy’s premier oil company ENI SPA (NYSE: E), whose operations in Libyan had been suspended by the civil war, is now at 70 percent of its output capacity from the pre-war period.

Although Italy had generally cordial relations with former Libyan leader Moammar Gaddafi, such ties were ruptured during the 2011 revolt that brought Gaddafi down and ended his life. Indeed, the original friendship treaty had been signed by Gaddafi and ex-Italian Prime Minister Silvio Berlusconi three years ago.

Under that treaty, ENI was to build a huge superhighway along the coastline that would link Libya with its neighbors Tunisia and Egypt. In exchange, Libya granted ENI significant oil concessions.
That treaty also included a provision whereby Italy would pay multi-billion euros to Libya as compensation for Rome’s multi-decade colonial rule over the North African nation. It’s not clear if this provision will also be reactivated under the new agreement.

BBC reported that Italy and France are competing against each other to win the favor of the new government in Libya in order to obtain new oil deals and reconstruction projects. Indeed, on the day before Jalil’s visit to Rome, French Foreign Minister already visited the Libyan to Tripoli on Wednesday.

France, BBC speculated, wants to be rewarded for its key role in bringing down Gaddafi.