LONDON, NOV. 28 -- Britain today restored diplomatic relations with Syria that this country broke off four years ago after accusing the Damascus government of sponsoring international terrorism.

The move, which diplomatic sources said had been taken with U.S. urging, is seen as a further boost for President Hafez Assad's government and a reward for his support of the multinational effort against Iraq.

By restoring relations, Britain also effectively ends an embargo that has deprived Syria of nearly $200 million in annual development aid from the European Community and curtailed its trade with the EC.

In announcing the restoration, Foreign Secretary Douglas Hurd said he hoped the move also would help secure the release of three British hostages in Lebanon. They are believed to be held by Shiite Moslem groups close to Iran, but Hurd said Syria, the main power broker in the country, had promised to work for their release.

Hurd told Parliament that the Syrian government had strongly rejected terrorism and promised it would "take action against the perpetrators of such acts" in cases "which are supported by convincing evidence." He said it had also provided a confidential account of its position on the Hindawi affair, in which a Jordanian national allegedly supported by Syrian intelligence tried unsuccessfully to blow up an Israeli El Al jetliner at London's Heathrow airport in 1986.

Nezar Hindawi is serving a 35-year prison sentence for attempting to smuggle a bomb aboard the airliner by duping his pregnant Irish girlfriend into carrying the timed explosive aboard the flight. The incident caused widespread revulsion here.

After investigating the incident, Britain charged that Hindawi had been operating under the direct control of the Syrian Embassy and of Syrian air force intelligence agents. It accused the Syrian ambassador of direct involvement and expelled him and his staff.

Britain also demanded the punishment of former air force intelligence chief Mohammed Khooli and his deputy, Haitham Said. Neither was punished and Khooli reportedly was promoted. Syria has denied any role in the affair.

Damascus also has long been the headquarters of Ahmed Jibril's Popular Front for the Liberation of Palestine-General Command, the Palestinian faction alleged by several Western intelligence agencies to have conducted the terrorist bombing of Pan Am flight 103, which exploded over Lockerbie, Scotland, in 1988, killing 270 people. Assad has refused to expel or punish Jibril, saying no one has offered firm evidence of the group's role in terrorism.

Nonetheless, Hurd defended restoring ties with Damascus, telling BBC radio, "Having diplomatic relations with a country doesn't mean that you approve of everything it does. It just means that you've got a strong interest of your own in keeping in contact with it.

"We have to calculate what British interest is," Hurd added. "That is what British foreign policy is about."

Hurd said the Syrians do not have control over the British hostages, but said that "it's become fairly clear recently they are in a position to hinder or help in their release."

Former prime minister Margaret Thatcher had opposed the move for several months, insisting Syria must first meet British conditions by punishing those responsible for the Hindawi affair. But Hurd said she had relented and approved the move before stepping down this morning. Diplomatic sources said Washington had made "representations" to London on the issue.

Relatives of the three hostages -- Church of England envoy Terry Waite, television journalist John McCarthy and retired fighter pilot Jack Mann -- welcomed the move. Gerald Kaufman, the opposition Labor Party's foreign affairs spokesman, termed the move "logical."

But Greville Janner, a Labor member of Parliament, said it was "sad and cynical opportunism to enter again into diplomatic relations with Syria when . . . the government itself has pinpointed the person responsible for the Hindawi affair and the Syrians have promoted him."

Correspondent Caryle Murphy added from Dhahran, Saudi Arabia:

President Bush told Assad when they met last week in Geneva that the United States would "reject any Israeli attack on Syria," according to a report today in the Lebanese newspaper, al-Hayat, published in London and distributed throughout the Arab world.

The article, written from Damascus, reported that that the Syrian president replied to Bush that "Israel will remain Israel."

The Syrian leader reportedly gave an account of his conversation with Bush in a meeting Tuesday of the National Progressive Front, Syria's main political coalition.

Quoting sources close to the front, the article said Assad expressed "great satisfaction with the personal style of the American president."

He also said Bush was committed to finding a settlement for the Arab-Israeli dispute immediately after the Persian Gulf crisis is resolved, al-Hayat reported.

The article also asserted that Assad said Bush was interested in Syria's "security concern" and "vital interests."