"We would like to achieve bigger volumes in investment cooperation between Russia and Libya in the oil and gas sectors," Russian news agencies quoted al-Baghdadi Ali al-Mahmoudi as saying before talks with his Russian counterpart.

Libya, a major oil and gas exporter, has become an attractive market for both Russia and the West since 2003, when the U.N. Security Council lifted sanctions against the country viewed for decades as a pariah in the West.

Russian Prime Minister Vladimir Putin, then the Russian president, visited Libya in April to ensure favourable treatment for Russian firms vying with Western and Chinese rivals.

Moscow then agreed to write off $4.5 billion of Libya's debt in return for contracts going to Russian firms.

Libyan leader Muammar Gaddafi, keen to balance growing ties with the West, used the April summit to stress special relations with Moscow.

In a separate signal of improving ties, al-Mahmoudi's plane flew back to Moscow Alexander Tsygankov, an executive of Russian oil company LUKOIL detained in Libya since November.

Tsygankov has spent eight months in detention without being formally charged. Russian media has speculated he was detained on suspicion of involvement in industrial espionage.

"Yesterday, on the orders of the leader of the Libyan revolution Gaddafi, a decision was made to free ... the LUKOIL official," al-Mahmoudi said. "He was flown to Moscow on our special flight."

Mahmoudi also invited Putin to visit Libya again in late August to attend an opening ceremony of a railway built by Russian Railways, under a 2.2 billion euro contract.

"We will do everything to create favourable conditions for Libyan investment in Russia. We will also work in the oil and gas sector not only in Libya, but in other third countries," Putin said without elaborating further.

ENERGY INTERESTS

During the Tripoli summit, Russia's gas export monopoly Gazprom showed interest in taking part in the construction of a new gas pipeline linking Libya and Europe.

Libya currently exports about 8 billion cubic metres (280 billion cubic feet) of natural gas per year to southern Sicily via the Greenstream pipeline owned 50/50 by Italian oil major Eni and Libya's National Oil Corporation (NOC).

Gazprom and Eni formed a strategic partnership in 2006, which allowed for energy asset swaps, including those Eni has in Libya. The two have said the deal could also involve pipelines.

Libya's natural gas reserves are estimated at 52 trillion cubic feet, or 1.47 trillion cubic metres, though NOC said they could be more than twice as large.

Gazprom is also interested in buying additional volumes of Libyan oil and gas and eyeing a refining joint venture in Libya.

Its plans will dampen European hopes of finding alternative sources of gas to lessen dependence on Russia.

Al-Mahmoudi said Libya was planning to open an office in Moscow of its investment agency and hailed energy cooperation as a new era in bilateral relations.

"Our cooperation is elevated from a purely military and technical level," he said. "This is indeed a development worthy of mention in history texts."

The arms trade remains an important element of bilateral ties. Moscow hopes to sell Libya 2.5 billion euros worth of anti-aircraft systems, jet fighters, helicopters and warships.