Now here is a man we can talk to

Why do we hear so little nowadays about Gaddafi? He was once the biggest rogue of all. Annette MacKe

I don't remember seeing any giant bronze statues of Colonel Muammar Gaddafi when I was in Libya last month - but then the colonel has always been more canny than the average dictator. So canny, in fact, that while the former mad dog of Tripoli still finds himself on America's "axis of evil" list, he's made a lot of new friends in the west.

The British embassy, for instance, reopened in 1999 after 15 years of frostiness, in the wake of the shooting of WPC Yvonne Fletcher during the 11-day siege of the Libyan embassy in London in 1984. Anthony Layden, a Scotsman, has been in the post of ambassador for since last October. "Colonel Gaddafi is a man we can talk to," he tells me, when we meet at his elegant residence. "He's the sort of man you can engage in philosophical discussion, in a reasonable discussion of policy."

When Mike O'Brien became the first British minister to visit Libya in 20 years last August, Layden claims that "he had a very stimulating discussion with [Gaddafi]".

Shouldn't we worry, though, I ask His Excellency, about those alleged weapons of mass destruction, which after all got Saddam Hussein into such a mess?

The British ambassador remains sanguine. "I think [Libya's] position is that they are willing to sign up to any international agreement we would like them to sign up to, to reassure other countries that this sort of thing is not going on," he says. "At the moment Libya remains on our list of countries of concern on this issue. We are making progress."

He has no doubt that Libya is "on the right side in the war against terror". As a moderate Islamic country, it views al-Qaeda as a threat - an Interpol arrest warrant for Osama Bin Laden was issued in Libya in 1998. And it has apparently been very helpful in the fight against al-Qaeda since 11 September.

There is still the prickly problem of the lack of democratic elections and political parties in Libya. Its system is one of those where, when you come of age, you don't get the chance to vote - you get the chance to be part of the one available political option: go along to your local People's Congress or lump it.

"Colonel Gaddafi is very mindful of what his people think and what their views are also," says Layden. "I don't think you can run a country like this for 30 years without being concerned about what people think and having concern for their interests."

This is an extraordinary turnaround for what not so long ago was the world's favourite rogue state. Back in the 1980s, Saddam Hussein was Ronald Reagan's covert ally and it was Colonel Gaddafi who incurred America's wrath. In those days, the colonel loved supporting what he saw as fellow rebels and allegedly bankrolled the IRA and the PLO. The low point came in 1986, when America launched air strikes against Tripoli and Benghazi, killing Gaddafi's adopted daughter and about 130 others.

A school I visited had commemorated the air strikes with a display showing crudely painted anguished faces and lots of blood. The details had got confused - thousands were killed by the Americans, the children said, "and it wasn't us who blew up the plane". "The plane" was Pan Am Flight 103, which exploded over the Scottish village of Lockerbie, killing 270 people, in 1988. That was when Libya was written off the map. United Nations sanctions were imposed and suspended only in 1999, when two Libyans were handed over to be tried for the Lockerbie deaths, but the sanctions still have not been permanently ended.

Libya is eager to be removed from George Bush's dirty half-dozen. "We are very interested in resolving this so as not to give the other side a pretext to attack Libya," says Dr Saleh Ibrahim, an academic and an influential member of the revolutionary committee system that enforces this "people's democracy". "There are things that are not just, but you have to deal with reality, and the reality is that there is an imbalance between Libya's position and the other sides' position - that is the US and the UK."

It was in the late 1970s that this country of roughly five million people opted for a socialist-style system that would implement the philosophical musings of Colonel Gaddafi's Green Book. Industries were nationalised and the only jobs available were with the government. Limits were placed on savings and restrictions on moving money overseas. Families were allowed only one home. In return, you got cheap bread, rice and other staples, along with limited offers on everything from televisions to cars. Free healthcare and education were thrown in.

Oil money hid the cracks in the idea. Until now. Unemployment stands officially at 30 per cent and there has been a loss of faith in the standards of public healthcare and even educa- tion. Meanwhile, a million-odd immigrants have arrived from sub-Saharan Africa, all eager to take advantage of Colonel Gaddafi's latest scheme to open up to Africa.

The man who is trying to put this right is Shukri Ghanem - in effect the minister for the economy, although no one is called a minister in this system of government by the people. Ghanem is stunningly forthright about Libya's economic problems.

"A good part of the oil revenue has been spent on the daily budget, which is money thrown in the sea, because you just give salaries, end up importing goods and consume it [the money] and that's it. Some of it has been put into capital projects, but, unfortunately, some of these were not profitable in any way - you might call them white elephants. There are a number of industries like this, textiles and even steel. For so many years, the emphasis was on the public sector; now we are changing this emphasis to enable the private sector to take its good part in the economy."

Why this sudden change? The official line is that the Green Book was simply misunderstood and there is now a new way to read it. "The whole world is changing and we cannot sing alone," says Ghanem.

Perhaps Gaddafi's cleverest trick has been to distance himself from the day-to-day running of his country - all in the name of handing power to the people. His formal title is not head of state but "Leader of the Revolution". Many Libyans say they see him as a mentor and a friend. "He's like a big brother," said one revolutionary, in a rather unfortunate turn of phrase.

Colonel Gaddafi seems to have pulled it off.

"I certainly don't think Libya is next [after Iraq]," concludes Anthony Layden. "If you look at Libya ten years ago and look at Libya today, Libya is moving in exactly the direction we would have wanted it to move, had we been able to write the script ourselves."

Annette MacKenzie went to Libya for BBC Radio 4's Crossing Continents. The programme will be broadcast on Thursday 1 May at 11am, repeated Monday 5 May at 8.30pm