"There is no way to have these two states so close, because they are already integrated. Two million Palestinians live in Israel, Gaza is isolated … torn apart and isolated. Israel should get rid of their nuclear weapons - the Muslim countries will not recognise Israel as long as they have nuclear weapons - and these problems would be done," he added.

"I don't believe that Barack Obama [the US president] really understands the problem," he said.

"He was a senator; he used to worry about the state that he represents and the American people. So he doesn't understand it deeply enough. Maybe in the future he might."

The Libyan leader also said the current Arab approach to resolving the 60-year Arab-Israeli conflict and creating a Palestinian state would not yield positive results.

"There is no way to have two states in that piece of territory."

Lockerbie controversy

On the question of whether Tripoli and London had reached some kind of agreement on the 1988 Lockerbie bombing, Gaddafi said that no "deals" were struck between the two governments to release the only man convicted of the attack.

He said the matter should now be closed.

"This problem [Lockerbie] is over. There is no way to discuss it or appeal it or anything," Gaddafi said.

"Abdel Basset [al-Megrahi] on a personal basis had the right to appeal, but because of his illness they released him. There is no need it seems to appeal anything," he said of the decision by the Scottish justice minister to release al-Megrahi on compassionate grounds last month.
 

Libya has faced severe criticism for the celebrations in the capital Tripoli that greeted the man who was found guilty of the bombing of Pan Am flight 103 over the Scottish town of Lockerbie in 1988.

Forty families of some of the 270 people killed in the attack protested outside the UN on Wednesday while Gaddafi was giving his first ever address to the General Assembly.

Gordon Brown, the British prime minister, snubbed the Libyan leader by not attending his speech in protest at the official reaction to al-Megrahi's release. 

The US senate also passed a resolution condemning the "lavish" welcome-home ceremony and demanded Tripoli apologise for the celebration.

'Illegitimate and undemocratic'

In the interview with Al Jazeera's Ghida Fakhry, Gaddafi took the opportunity to repeat his fierce criticism of the UN Security Council.

"It [Security Council] is illegitimate and undemocratic and we won't go to it and give it recognition," he said.

"I ask the world not to accept this situation. Many wars have happened and it hasn’t stopped. It's a tool in the hands of the big countries and they use it to advance their own interests."

Gaddafi said he had a representative at the special session of the Security Council of which his country is currently a member but only because it was "Libya's turn".

He maintained that he was only in the US because of his role as the current head of the African Union.

Despite this criticism, Gaddafi said he saw "no obstacles" to improved relations with the US under the Obama administration, and said relations with the US and UK were good.

When asked if he was tired after more than 40 years of power, Gaddafi said he had already handed power over to the Libyan people.

"I am out of power. The people are in power now," he said. "I am not under heavy political or administrative burdens ... or else I would  not have lasted for 40 years.

"We handed over power to the people in 1977. The policies are done by the national congress ... Libya runs by itself and by its people. The democracy is direct from the people."