This is a huge story that’s getting almost no coverage; wacky old Gaddafi continues to pull surprises out of his purple velvet hat, and his latest is an offer of a peace treaty with Israel: Report: Israeli delegation to visit Libya later this month. (Hat tip: Baruch.)

Following the announcement by President Muammar Gaddafi last month that Libya is willing to forego its weapons of mass destruction, Israel has initiated diplomatic contacts with Tripoli.

The head of the Foreign Ministry’s diplomatic team, Ron Prosor, met some two weeks in Paris with an Arab diplomatic, in order to establish a channel of communications with Tripoli. The meeting was coordinated with Foreign Minister Silvan Shalom, Prime Minister Ariel Sharon and Mossad chief Meir Dagan.

A high-ranking Israeli delegation is expected to visit Libya with the aim of reaching a mutual understanding on the signing of a peace agreement, Kuwaiti newspaper A-Siyasa, quoted on the Al Bawaba website, reported Tuesday.

Meanwhile, in comments published Tuesday, Libyan President Muammar Gaddafi was quoted as saying he is ready to compensate Libyan Jews whose properties were confiscated. He also said he is prepared to allow Libyans to travel to Israel, according to Arab press reports.