A New German-Libyan Beginning

Calling their meeting a "new beginning" for German-Libyan relations, Schröder said it was time for Libya to strengthen ties with the European Union. He called on Gadhafi to continue a course of moving towards a social market economy and added that Germany supported Libya's desire to join the World Trade Organization.

During their first meeting that also took place in a traditional Bedouin tent outside Tripoli on Thursday, Schröder and Libyan leader Moammar Gadhafi had clashed over Iraq.

Gadhafi, who reaffirmed his stance against terrorism, blamed the United States for the continuing violence there and called for US troops to withdraw. He told Schröder that the EU and Arab countries should unite to counter the US as a superpower. Schröder rejected that idea and expressed doubts over the wisdom of a sudden pullout, a German official said.

The two men were also at odds over the US role in the Middle East.

Compensation opens doors

However they agreed on the importance of developing relations between Germany and Libya following a deal last month for Libya to pay compensation to 168 mainly German survivors of an attack on a Berlin nightclub.

Libyan Foreign Minister Abdelraham Shalgham told reporters Thursday that Schröder's trip was "very important for the development of relations with Western states, especially with Germany."

Aside from the politics of the visit, Schröder is accompanied by 25 leaders of German industry who are seeking business in the north African state.

The chancellor said at the opening ceremony that the rebuilding of Libya's infrastructure "offered great opportunities" for German industry.

Schröder spent Friday morning opening an oil drilling well operated by German company Wintershall in the desert hundreds of kilometers south of Tripoli.

The company supplies oil from five Libyan inland fields as well as an offshore drilling platform.

"Libya is one of the crucial targeted areas," said Wintershall chairman Reinier Zwitserloot.

Gadhafi to come to Berlin

Schröder, the first post-war German chancellor to visit Libya, is scheduled to meet Gadhafi again later Friday when he is expected to push him to cooperate more fully in the international war on terrorism.

Gadhafi also accepted an invitation from Schröder to visit Germany, a German official said.

In addition to the Berlin pay-out, Tripoli has also paid damages to the relatives of people killed in the bombing of a Pan Am jet over Lockerbie, Scotland, in 1988, and it reached agreements in January over a French airliner blown up a year later.

Schröder's trip comes during a week in which the European Union lifted an arms embargo against Libya, and follows a visit last weekend by Italian Prime Minister Silvio Berlusconi (photo).

Help in mine-cleaning

In other issues raised in their first meeting, Gadhafi told Schröder he expected assistance from Germany in removing the landmines laid in Libya by Nazi forces during World War II. Both sides agreed to consider how to resolve this problem and German companies could be involved in the mine-clearing, the official said.

Libya was welcomed back into the international community late last year after announcing it was abandoning attempts to develop nuclear, biological and chemical weapons.

Schröder was expected to arrive in Algeria late on Friday for the second and last leg of his North Africa trip.