Italy was one of Libya's major trading partners in the late 1970s. Relations with Italy, however, have been somewhat mercurial. In 1973 Libyan aircraft strafed an Italian combat vessel patrolling an area in the Mediterranean where an earlier dispute had led to the detention of Italian fishing trawlers. Libya officialÍÍÍÍly apologized for the strafing incident and relations improved in 1974 with Jallud's visit to Italy and the conclusion of several commercial and technical agreements. However, there were three more incidents involving Italian fishing boats operating near the Libyan coast in December 1975. Earlier that year, British press reports alleged that Libya was funding radical Italian political groups.

Despite these frictions, relations improved in 1975 because agreement was reached regarding compensation for property lost when Italians left Libya under pressure after the 1969 revolution. A major commercial transaction was completed in December 1976 Libya purchased more than 9 percent of the stock of the Fiat Company, placing 2 representatives on Fiat's 15-member board of directors in the process. Increasing pressures were brought on Fiat, Italy's largest privately owned firm, by the Italian government and Western interests to buy back Libyan-owned stock shares, which by 1986 amounted to a 15.2-percent share in the firm. The Libyan government-owned Libyan Arab Foreign Investment Company agreed to divest itself of the stock in September 1986, presumably to generate revenue of over US $3 billion to compensate for lower Libyan oil revenues.

Data as of 1987