British Prime Minister Tony Blair put his personal seal of approval on Libya's return to international respectability by shaking hands Thursday with Libyan leader Moammar Gaddafi in a ceremonial Bedouin tent near Tripoli.

Blair's visit to the home of the Arab ruler, whom President Ronald Reagan once described as the "mad dog of the Middle East," constituted a diplomatic reward for Gaddafi's agreement to dismantle Libya's weapons of mass destruction programs and condemn terrorism.

A more tangible payoff also began taking shape with the announcement by Blair's office that Royal Dutch/Shell has signed a $200 million deal to drill for oil and natural gas off the Libyan coast and that BAE Systems, a major British defense contractor, is negotiating to sell civilian airliners to Libya.

Citing Gaddafi's commitment to destroy unconventional weapons programs, Blair told reporters after the meeting, "Libya's voluntary and open implementation of that decision gives us real hope that we can build a new relationship with it, one for the modern world."

"Times change," he added. "And when they do change, we should be prepared to change with them, provided the changes are real."

Blair's visit was the first by a British prime minister to Libya since Winston Churchill journeyed to Tripoli during World War II. Blair arrived the day after attending a memorial service in Madrid for the 190 victims of the commuter train bombings two weeks ago, believed to have been carried out by Islamic extremists connected to the al Qaeda network.

Opposition politicians and some commentators in London questioned Blair's timing, noting that Gaddafi was once considered a prime sponsor of international terrorism. He is widely deemed responsible for the December 1988 bombing of a Pan Am jumbo jet over Lockerbie, Scotland, that killed 270 people. Some families of the victims also objected to the Blair visit, but others welcomed it.

Libya has accepted responsibility for the attack and paid millions in reparations to the families. It has also agreed to host a British police team investigating the unsolved killing of Yvonne Fletcher, 25, a police officer who was gunned down outside the Libyan Embassy in London in 1984 during a political demonstration. Witnesses said the shot was fired from the embassy. Gaddafi has also acknowledged that he provided weapons and explosives to the outlawed Irish Republican Army, which waged a 30-year campaign against British rule in Northern Ireland.

Blair said he had not forgotten the grievances of victims and relatives. "In reaching out the hand of partnership today, we do not forget the past," he said, adding, "Trust on both sides will take time to establish. But the signs are better than they have been for many years. And the future prize in terms of security not just of this region but the wider world -- indeed our own country -- is great."

Britain, which broke off diplomatic relations with Libya in 1984 after the police officer was killed, has led the campaign to bring Libya back into the fold. Britain resumed relations in 1999, and the MI6 intelligence service established close contacts with its Libyan counterparts, leading to an approach last March by the head of Libyan intelligence, Musa Kusa. Nine months of secret talks led to an announcement in December that Libya had agreed to destroy its weapons programs and join the U.S.-led struggle against terrorism.

Britain and the United States have hailed Gaddafi's turnaround as a positive consequence of the Iraq war because, officials asserted, Gaddafi decided to avoid the fate of Iraqi President Saddam Hussein, who lost power and is in U.S. custody. But others have said that more than a decade of economic sanctions had bled Libya dry and forced Gaddafi to capitulate.

The Bush administration has been more skeptical than Blair about Gaddafi's good faith. But this week the United States dispatched to Tripoli an assistant secretary of state, William J. Burns -- the highest-level U.S. official to visit Libya in more than 30 years.

Tony Blair walks with Libyan leader Moammar Gaddafi in Tripoli during the first visit to the country by a British prime minister since 1943.