Tony Blair shook hands with Colonel Muammar Gaddafi today in a meeting designed to reward the Libyan dictator for renouncing terrorism and weapons of mass destruction.

The brief hand clasp took place in Colonel Gaddafi's Beduin tent on farmland outside the Libyan capital, Tripoli.

After his talks, Mr Blair admitted that it had felt "strange" to shake the Libyan leader's hand, and that Britain's relationship with the former pariah state was still very new. But Colonel Gaddafi had assured him that the steps he had taken to rejoin the international mainstream were irrevocable.

"Of course, we must be aware of the pitfalls. Trust on both sides will take time to establish. But the signs are better than they have been for many years," Mr Blair told a press conference.

"And the future prize in terms of security not just of this region but the wider world - indeed our own country - is great."

He praised the "full and transparent co-operation" that Libya had given on dismantling its nuclear programme and its chemical and biological weapons, and he listed other areas, including the armed forces, education and oil extraction, in which he expected ties between the two countries to grow.

He announced the appointment of a defence co-ordinator to liaise between Britain and Libya in the war on terror.

Critics of the visit have said that it is too soon for Mr Blair to meet a man who sent cash and arms to the IRA, and who has admitted his country's responsibility for the 1988 Lockerbie bombing in which more than 270 people died.

The Conservative Party leader Michael Howard told BBC News 24: "To give Colonel Gaddafi this huge propaganda coup and to call him courageous for giving up terrorism is quite extraordinary."

In a sequence of events designed to highlight the benefits of the new relationship, minutes before the Prime Minister's plane touched down at 9.18am it was confirmed that a team of Metropolitan Police officers will travel to Tripoli on April 3, to investigate the 1984 murder of WPC Yvonne Fletcher.

Soon after, the oil and gas company Shell announced that it had signed a heads of agreement with the National Oil Corporation of Libya on offshore gas exploration. The initial contract is expected to lead to lucrative long term involvement in the Libyan oil industry.

British Aerospace is also in advanced discussions with the Libyan government over the supply of civil aircraft.