LONDON - Britain has officially recognized Libya's main opposition group as the country's legitimate government, the U.K. foreign secretary said Wednesday, announcing the expulsion of all diplomats loyal to Moammar Gadhafi's regime.

William Hague also said his country was unfreezing 91 million pounds ($150 million) of Libyan oil assets to help the National Transitional Council, which the U.K. now recognizes as "the sole governmental authority in Libya."

The council had been invited to send an ambassador to London, Hague told reporters, adding that "we will deal with the National Transitional Council on the same basis as other governments around the world."

The Libyan charge d'affaires was summoned Wednesday morning and informed that he must leave the country within three days, the Foreign Office said. A government official, who spoke on condition of anonymity in line with official policy, said the seven remaining diplomats were being given more time in case they wanted to defect.

Britain's diplomatic moves implement a decision made at a July 15 meeting in Istanbul during which the U.S., Britain and 30 other nations recognized Libya's main opposition group as the country's legitimate government.

A popular uprising seeking to oust Gadhafi broke out in February, but the front lines in the civil war have remained largely stagnant since then. Rebels, backed by NATO air bombings, control much of the country's east and pockets in the west. But Gadhafi controls the rest from his stronghold in Tripoli, the capital.

Britain is one of the leading participants in the NATO-led campaign, but the government has been under pressure over its failure to remove Gadhafi from power.

Fawaz Gerges, director of the Middle East Center at the London School of Economics, said Britain's decision doesn't alter the military stalemate or the balance of power, but gives the rebel movement more legitimacy.

"The British government wants to send the message that they are still engaged and committed," he said. "I think all sides are trying to reposition themselves, trying to save face and minimize damage. We're moving into a phase of negotiations. The French and British have realized that Gadhafi isn't going anywhere."

He said behind-the-scenes discussions may be focused on the prospects for a power-sharing arrangement that would include the rebels and Gadhafi loyalists provided Gadhafi himself steps down.

Libya's rebels saluted Britain's decision. Mustafa Abdul-Jalil, the head of the rebels' council, said Britain's recognition "gives us a political and economic boost."

"We will try through this recognition to get our frozen assets," Abdul-Jalil told a news conference in the rebel capital of Benghazi in eastern Libya. "This means Gadhafi and his followers are no longer legitimate." He added that the new Libyan ambassador to Britain would be Mahmud Nacua, who he described as a Libyan exile in Britain.

This week, Hague said for the first time that Gadhafi might be able to remain in Libya as long as he is not in power. He said that "Gadhafi is going to have to abandon power, all military and civil responsibility," but "what happens to Gadhafi is ultimately a question for the Libyans."

France and the U.S. have made similar suggestions.

Hague denied that the rhetorical shift was aimed at setting up secret talks between the West and the Libyan leader, saying it was instead an effort to give the rebels the flexibility they might need to negotiate their own resolution to the conflict.

Rebels have recently floated the suggestion that Gadhafi could retire in Libya, provided he resigns -- although Abdul-Jalil insisted Wednesday that the proposal was no longer on the table.

Hague said that the ideal end to the Libya operation would involve Gadhafi either exiled or brought before the International Criminal Court. But he acknowledged that removing Gadhafi from the country was not something "we can impose or guarantee."

A handful of demonstrators gathered outside the embassy in London following Hague's announcement with rebel banners, heckling the diplomats inside and threatening to climb onto the balcony and tear down Gadhafi's green flag. They were told to leave by police, who stood guard outside the four-story building across from Hyde Park. There were occasional signs of activity inside the building, although no one emerged to address journalists.

One of the demonstrators, who wore a rebel flag pin over his heart, said that while any defections would be welcome, any defectors wouldn't be treated as heroes.

"It's too late for them," said 48-year-old Abdelatif Kleisa, a Libyan emigre now living in Sheffield. Asked if any of the diplomats could win a place in the rebel movement, the businessman let out an expletive.

"No way," he said. "They have to get normal jobs like anyone else. We struggled for 42 years. Now it's their turn to struggle."