<B>BRITISH</B> Prime Minister Tony Blair sealed Libya?s return to the international fold yesterday with an historic handshake that rewarded Muammar Gaddafi for renouncing weapons of mass destruction.

On the first visit to Libya by a British leaer since 1943, Blair was whisked to a ceremonial tent outside Tripoli to meet the Libyan leader, once condemned by former US President Ronald Reagan as ?this mad dog of the Middle East.?

There the pair symbolically exchanged a five-second handshake for the cameras. Blair has promised not to ?forget the pain of the past? after the 1988 Lockerbie bombing which killed 270 people and accusations that Gaddafi armed Irish Republican Army guerrillas. But he said Libya should be ushered back into the international fold for turning its back on banned weapons and paying compensation for Lockerbie. Officials said the leaders would hold about 90 minutes of private talks.

Gains to British business from the diplomatic thaw were being notched up even before Blair arrived. An official on the premier?s plane to Tripoli said oil giant Royal Dutch/Shell had won a $200 million gas exploration deal with Libya.

Blair arrived at Maitiga airport, a former US military base, to be greeted by Prime Minister Shokri Ghanem. He is the first British leader to visit Libya since Winston Churchill in World War Two.

The leaders of Spain and Italy have already met Gaddafi in recent months, and earlier this week Assistant Secretary of State William Burns became the highest-level US official to visit Libya in more than 30 years. Many of the Lockerbie victims were American. Late on Wednesday, Blair brushed aside domestic criticism of his visit, saying it was a risk worth taking. ?

Let us offer to states that want to renounce terrorism and the development of nuclear, chemical or biological weapons our hand in partnership to achieve it as Libya has rightly and courageously decided to do,? he told a news conference. ?That does not mean forgetting the pain of the past but it does mean recognising change when it happens,? he said.

Libya announced in December it would abandon efforts to acquire weapons of mass destruction, in a bid to further mend ties with the West after agreeing to pay damages for the Lockerbie bombing.

Critics accuse Blair of being motivated by trade prospects rather than politics in what they see as an act of misguided appeasement. But London played the leading role in persuading Libya to renounce banned weapons and insists its softly-softly diplomatic approach to Tripoli was key to winning results.

Britain?s opposition Conservatives said the timing of the visit was ?highly questionable?, coming a day after he attended a memorial service for this month?s Madrid rail bombing victims ? Europe?s biggest terror attack since Lockerbie.

But many relatives of the Lockerbie victims were supportive of the diplomatic milestone. British firms, like their continental European counterparts before them, are keen to exploit opportunities in Libya.

Aside from Shell, defence contractor BAE Systems has announced it is in talks on aviation projects, including potential aircraft sales.

Britain cut diplomatic ties with Tripoli after policewoman Yvonne Fletcher was shot dead outside Libya?s London embassy in 1984. Foreign Secretary Jack Straw said on Thursday British police will go to Libya soon to pursue the case.