PRINCE ANDREW enjoyed a four-day holiday in Tunisia last week in which he accepted hospitality from a convicted gun smuggler before visiting Colonel Muammar Gadaffi, the Libyan leader. His office says he is repaying the cost.

Andrew toured desert sights, stayed in top-class hotels and ate meals with Tarek Kaituni, his Libyan-born friend who in 2005 was convicted of buying a machinegun and secretly attempting to transport it from Holland to France.

The pair were accompanied by about eight other people including several women, bodyguards and assistants. On Friday they flew from Tunisia to neighbouring Libya in order to continue their holiday with Gadaffi.

Kaituni was seen paying bills for the group at two hotels. When asked about the relationship between the two men, a spokeswoman for the Duke of York said that he would be reimbursing the full cost of the holiday.

"The duke is reimbursing him [Kaituni] and we just do it sort of privately because the duke is not carrying a whole lot of money with him," said the spokeswoman.

"The trip to Tunisia was a holiday. It's a private visit to Libya but the meeting with Gadaffi was through official channels and was with the knowledge of the Foreign Office and UK Trade & Investment."

Andrew's official role is as a roving ambassador for British trade, a function for which he receives no salary although last year his expenses, which are met by the taxpayer, amounted to £436,000.

The exposure of Kaituni's criminal past, which The Sunday Times revealed in August, has not deterred Andrew from pursuing their friendship.

The rendezvous in north Africa was the second time the prince has flown there to meet Kaituni and Gaddafi within the past three months.

Kaituni, who has been involved in a number of international property deals, played host to Andrew and several other acquaintances last week in the oasis town of Tozeur in southern Tunisia.

On Monday the group arrived in the town, one of Tunisia's most beautiful oases with 350,000 palm trees, and booked in at the Hotel Dar Cherait.

The hotel boasts patios with fountains, a swimming pool set in gardens of palms, bougainvillea and jasmine and is furnished with antiques and multicoloured ceramics.

Andrew stayed in the £480-a-night presidential suite, which features two bedrooms with carved gold-coloured bedsteads. The rest of the party stayed in other suites costing between £182 and £302 a night. Kaituni picked up the bill when they checked out on Friday morning.

On Wednesday Andrew and his party rode the Red Lizard train, built by the French during Tunisia's colonial era, which passed through the Gorges of Selja on its way to the oasis of Tamerza close to the border with Algeria.

They stayed that night at the Tamerza Palace hotel while retaining their rooms 40 miles away at the Dar Cherait in Tozeur. The Tamerza Palace is a favourite with royalty, prime ministers and the jet set. It was described in one review as

a "perfect Shangri-La . . . one of the most luxurious hotels in Tunisia". Andrew stayed in the presidential suite, which costs about £623 a night and boasts a terrace and views of a palm grove and the Atlas mountains beyond.

Martine Laberge, the commercial manager, said: "The presidential suite is decorated in a traditional Tunisian way and that is why I think the Duke of York was interested in that room."

On Wednesday night Andrew, Kaituni and their entourage enjoyed a candlelit dinner at Les Terrasses de l'Atlas, the hotel's restaurant.

The menu included soup with sugared apricots, tajine Malsouka, lamb with Djebel herbs and date mousse. Andrew, who was casually dressed in jeans and a blue woollen sweater, sipped a glass of red wine as the conversation encompassed various topics, including the state of the global economy.

After Kaituni had picked up the bill for the group's stay in Tamerza, the party returned to Tozeur on Thursday in time for a poolside lunch in the Dar Cherait. That afternoon the prince used the hotel's hammam spa.

Kaituni, who is now a US citizen, was arrested in November 2004 in Paris for buying a weapon, understood to be a machinegun. Judicial authorities in Paris say that Kaituni was given a two-month suspended sentence and was fined Û10,000 (£8,448) a year later.

Several sources said that Kaituni spent several months on remand in a Paris jail while awaiting sentence.

Salam Said, a property developer in Qatar and a former business associate of Kaituni, said that Kaituni had bought the gun after his former fiancŽe Lisa Van Goinga, a model, left him and then began a relationship with Matteo Marzotto, a senior executive at the Valentino and Marzotto fashion group.

"He got his driver to bring a gun from Holland. He was trying to show he was tough," said Salam Said.

Another source close to the case said: "It's a scary story and Lisa had problems for years over this. "Tarek [Kaituni] told the police that he went crazy when he saw that Lisa had a new boyfriend and that he called her to come to Milan and intended to commit suicide in front of her. "But since his conviction he has joked around St Tropez that he was planning to shoot himself and Lisa."

A former friend said of Kaituni: "His favourite television show was Lifestyles of the Rich and Famous. He'd spend hours watching that. "Years later he developed the tactic of first making friends with people close to celebrities he wanted to target and then getting to the celebrity himself."

Kaituni has previously denied his conviction for buying a gun. "It's not true. I'm not the only Kaituni in the world, there's thousands in Libya," he said. He could not be reached for comment this weekend.

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