LISBON (Reuters) - Libyan leader Muammar Gaddafi, visiting Europe after decades of ostracism by the West, on Friday condemned the “dictatorship” of the U.N. Security Council which he blamed for terrorism and world tensions.

Libya's President Muammar Gaddafi talks to the audience before their EU-Africa summit at Lisbon's University December 7, 2007. REUTERS/Nacho Doce

Speaking at Lisbon University on his first ever official visit to Portugal, Gaddafi also criticized the fact that only a few select countries in the world were allowed to have nuclear weapons while the rest, including his own, were not.

It was a tough speech by the flamboyant leader, who was once branded “mad dog of the Middle East” in the 1980s by then U.S. President Ronald Reagan because of his backing of terror groups.

His ties with the West have warmed rapidly in recent years after he abandoned support for terrorism and plans to build weapons of mass destruction and agreed compensation for families of victims of mid-air bombings of U.S. and French airliners.

Gaddafi, whose country is opening up to western investment in oil and infrastructure, is in Portugal to attend a European Union/African Union summit at the weekend. After Portugal he will be visit France and Spain after several decades of not being welcome.

Escorted by muscular female bodyguards dressed in desert-colored khaki and caps, Gaddafi criticized the current United Nations structure in which five countries -- the United States, Britain, France, China and Russia -- have veto powers.

He said the U.N. General Assembly, at which virtually all of the world’s states are represented, should be the executive body of the global organization, not the smaller Security Council.

“Why are we asking for democracy in countries, when there is dictatorship in the U.N. (and) if we can’t establish democracy in the world parliament,” he told academics and diplomats.

Dressed soberly in black, Gaddafi blamed this lopsided distribution of global power for fomenting tension and terrorism, such as the September 11, 2001, attacks against the United States which he described as “frightening”.

“It was an act of madness but those who committed it were not mad ... it was carried out so perfectly that it shook even the United States,” said the Libyan leader.

In an apparent rebuke to the U.S.-led invasion of Iraq and Washington’s war on terror, Gaddafi said military responses and legal prosecution were not enough to deal with terrorism.

“POLITICAL BANKRUPTCY”

Criticizing what he called the “political bankruptcy” of global politics, Gaddafi said the fate of the world was being decided by around a dozen individuals.

“So why are we surprised if there is a reaction. ... Some choose to bang their heads against walls but others hijack planes and do what we have seen,” he said, referring to the 2001 attacks in New York and Washington.

Gadaffi, who likes to portray himself as a champion of Africa, also called on former colonial powers to pay compensation to the countries they once ruled.

“If we don’t confront reality, we must pay the price ... terrorism, migration, revenge,” he said.

Fond of making a splash at international events, Gaddafi has pitched a Bedouin Arab tent inside a 16th century fortress on the Tagus estuary near Lisbon, where he receives visitors.

Rights campaigners urged Western leaders to raise the human rights situation in Libya when they engaged Gaddafi.

“Let’s not forget that in Libya there is no free press, no independent organizations, widespread torture of detainees and the continued detention of political prisoners,” Reed Brody of U.S.-based Human Rights Watch told Reuters.

In his speech, Gaddafi said he would prefer a world free of nuclear arms. “We want to live in real peace in the shade of an olive tree and not in the shadow of nuclear weapons,” he said.