UPDATE 2-Italy expects to revive valuable Libya contracts

Tue Aug 23, 2011 10:43am EDT

* Eni, Italian builders, Finmeccanica gain on contract hopes

* Libyan rebel envoy sees contracts revived after govt named

* Italy PM to meet Libyan rebel leader Wednesday or Thursday (Adds comments by Libyan rebel envoy)

By Deepa Babington

ROME, Aug 23 (Reuters) - Libya will honour all its contracts with Italian companies in a post-Muammar Gaddafi era, the rebel Libyan envoy to Rome and Italy's government said, in a boost for companies ranging from Eni to Finmeccanica .

Italy has stepped up efforts to safeguard huge interests in its former colony that range from oilfields to the defence and construction sectors as the Libyan conflict appeared to enter its final stages with a rebel advance into Tripoli.

Analysts have questioned whether Italy's initial hesitancy in supporting the rebels could put the country's previously close business ties with Libya at risk and warn that even with rebel assurances, little is guaranteed in a post-Gaddafi Libya.

But Libya's powerful envoy to Rome, Hafed Gaddur, who helped broker many of the deals between Italy and Gaddafi's Libya over the years, said the contracts would have to be respected since they were agreed between two states rather than two governments.

"Italy and Libya are two close countries and all the accords signed are in the interests of the two populations and the two states, and therefore all the contracts that were signed will be confirmed," Gaddur, who defected in February and backed the rebel movement, told Reuters.

The contracts will come back into force when a provisional government is installed for all of Libya, Gaddur said.

Italy's government also said it was confident.

"They've agreed to honour all contracts, including those with Italian companies," Italian Foreign Minister Franco Frattini told Italian radio, referring to the Benghazi-based rebel council.

"Italy's contracts are with Libya, not with Gaddafi."

Shares of Italian companies with operations in Libya - like energy firm ENI and defence operator Finmeccanica - surged this week on hopes the Libyan conflict was almost over and they would benefit.

Once Gaddafi's closest European ally, Rome has aggressively courted the rebels since abruptly switching sides to back them in April after a NATO bombing campaign began.

Italy has since opened a consulate in Benghazi and pledged financial support to the rebels.

BROAD COOPERATION

Frattini said he had already agreed with the rebel council on broad cooperation.

"I've personally signed an agreement -- they are general understandings -- on cooperation between the Italian government and the provisional Libyan government, which will become the new government of Libya," he said.

A 2008 friendship treaty signed between the two nations that includes a $5 billion reparations deal for colonial rule and a plan for Italian companies to build a major highway will also be revived, he said. It was suspended when the conflict began.

Prime Minister Silvio Berlusconi could meet Libyan rebel leader Mahmoud Jibril in Italy as early as Wednesday or on Thursday, Frattini said.

Berlusconi had carefully nurtured a warm personal relationship with Gaddafi in the last few years, allowing Italy to become one of Libya's biggest trading and business partners.

Eni, present in Libya since the 1950s, is Libya's biggest foreign oil operator with production contracts that run until 2042 and gas contracts for up to 2047. Frattini has said Eni staff are already in Libya to try to restart oil facilities in a bid to remain the country's top foreign player.

In addition, Libya owns some 7.5 percent of Italy's biggest bank, UniCredit , around 1 percent of Eni and some 2 percent of Finmeccanica, which had been banking on Libya as a key emerging market to boost revenues.

Italian builders like Impregilo and oil services company Saipem had been expected to be among other big beneficiaries of Libyan contracts before the conflict began.

For a factbox on investment ties between Italy and Libya, click on

(Editing by Barry Moody and David Cowell)