Kadhafi defiant despite NATO, Libyan rebel assaults

France, meanwhile, said it accepts that Kadhafi could stay in Libya if he quits politics, under a ceasefire deal to end a conflict with rebels backed by Paris.

"Millions of people are on my side," Kadhafi said in a speech broadcast over loudspeakers to partisans in Al-Aziziya, 50 kilometres (30 miles) west of the capital late on Tuesday.

"We are in our own home, and we will fight to the last drop of blood to defend our honour, our oil and our riches," he said.

"This war was imposed on us, and our only choice is to fight -- men, women and children -- with all our weapons to liberate (the rebel strongholds) of Benghazi, Misrata and Al-Jabal Al-Gharbi (in the Nafusa mountains southwest of the capital).

"We will march on the cities controlled by the traitors and mercenaries of NATO to retake them. NATO\'s bombs do not scare us."

In his last address on Saturday, Kadhafi said he would never leave the land of his ancestors after new international calls for him to step down and as rebels pressed their campaign to overthrow him.

French Foreign Minister Alain Juppe told LCI television on Wednesday that Kadhafi remaining in Libya was not excluded under a ceasefire deal Paris is backing.

"One of the possibilities being considered is that he stay in Libya but on the clear condition that he steps aside from Libyan political life," the minister said.

"That is what we are waiting for before we start the political process for a ceasefire."

Meanwhile, amid mounting diplomatic pressure on the Libyan regime to step down after four decades in power, US envoys held a rare meeting with regime representatives at the weekend.

US officials said it was a one-off meeting to deliver a message to Kadhafi, though Ibrahim told CNN television the talks were the start of a diplomatic process and the "first step in dialogue."

The White House on Tuesday said Kadhafi was clearly losing his grip on power and on his way out after four decades leading Libya, with spokesman Jay Carney insisting the Libyan strongman was "cut off from fuel and cash."

Rebels, who claimed to have retaken the oil refinery town Brega in the east, said on Tuesday they were trying to push Kadhafi\'s forces far enough west to place the city out of shelling range.

Rebel military sources said some loyalist troops were still thought to be at Bishr to the west, and were arcing rockets over Brega onto rebel positions.

The bulk of their forces were still waiting to enter the city, hampered by vast quantities of mines and trenches filled with flammable liquids, they said.

Abdulrazag Elaradi, a National Transitional Council (NTC) member visiting the front, said that in one 7.5 kilometre (five mile) tract the rebels had found more than 700 mines.

"This has never been done before; people have to know about this," he said, appalled that Kadhafi would mine his own country.

The rebels said on Monday loyalist forces had retreated from Brega, leaving just 150 to 200 fighters pinned down inside.

Citing intercepted radio chatter, another rebel military source said loyalists were led in retreat by their commander, Kadhafi\'s son Mutassim, leaving just a few fighters with dwindling supplies.

Kadhafi spokesman Mussa Ibrahim denied Brega had fallen to the rebels.

"They tried to recapture the town, but were repulsed losing 500 of their fighters in the battle," Ibrahim said in Tripoli.

Medics said at least seven rebel fighters were killed and 45 wounded during the day.

Brega is a major centre for channelling oil through the pipelines of the resource-rich Sirte Basin to the rest of the world.

In the west, rebels consolidated their grip on the desert hamlet of Gualish south of Tripoli as commanders readied for a new push on the capital.

"We are preparing for the battle. We hope (it will take place), God willing, before Ramadan," or just after the start of the holy Muslim fasting month at the beginning of August, said rebel commander Mokhtar Lakhdar.

Russia meanwhile was on Wednesday to host Kadhafi\'s foreign minister in Moscow as it presses ahead with mediation efforts to end the conflict.

Foreign Minister Abdelati al-Obeidi will be the highest-ranking Kadhafi official to visit Moscow since the conflict with the rebels erupted in mid-February and is expected to hold talks with his Russian counterpart Sergei Lavrov.

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