U.S., EU weigh no-fly zone; rebel-held cities try to repel Gadhafi loyalists
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© Ben Curtis/APSoldiers and dozens of tanks from the Libyan military's elite Khamis Brigade, led by Gadhafi's youngest son Khamis Gadhafi, take positions on Monday about 6 miles outside Zawiya.

Tripoli, Libya - Forces loyal to Libyan leader Moammar Gadhafi were massed near the Tunisian border on Tuesday, residents said, and the United States said it was moving warships and air forces closer to Libya.

Residents feared pro-Gadhafi forces were preparing an attack to regain control of Nalut, about 60 km (38 miles) from the Tunisian border in western Libya, from protesters seeking an end to Gadhafi's rule.

On Monday, foreign powers talked openly of imposing a "no-fly" zone or making other military moves against leader Gadhafi, as his forces used tanks and fighter jets to strike at rebel-held cities nearest the capital.

The U.S. said all options were open, including the use of warplanes to patrol the North African nation's skies and protect citizens threatened by their leader.

Pentagon and military officials told NBC News it appears "unlikely now" that the U.S. military will have to intervene, but "prudent moves" were being taken just in case.

France said it would fly aid to the opposition-controlled eastern half of the country. The European Union imposed an arms embargo and other sanctions, following the lead of the U.S. and the U.N. The EU was also considering the creation of a no-fly zone over Libya. And the U.S. and Europe were freezing billions in Libya's foreign assets.

"Gadhafi has lost the legitimacy to govern, and it is time for him to go without further violence or delay," U.S. Secretary of State Hillary Rodham Clinton said. "No option is off the table. That of course includes a no-fly zone." British Prime Minister David Cameron told lawmakers: "We do not in any way rule out the use of military assets."

Gadhafi, in an interview with ABC News at a seafront restaurant in Tripoli, laughed off a question about whether he would step down.

"They love me. All my people with me, they love me," he said. "They will die to protect me, my people." Gadhafi invited the U.N. or any other organization to Libya on a fact-finding mission, ABC reported.

Gadhafi denied using his air force to attack protesters but said planes had bombed military sites and ammunition depots. He also denied there had been demonstrations and said young people were given drugs by al-Qaida and therefore took to the streets.

The turmoil in the oil-rich nation roiled markets for another day. Libya's oil chief said production had been cut by around 50 percent, denting supplies that go primarily to Europe. The country provides 2 percent of the world's oil, but concerns the unrest will spread to other oil-rich nations has sent oil prices rising worldwide.

The uprising that began Feb. 15 has posed most serious challenge to Gadhafi in his more than four decades in power. His bloody crackdown has left hundreds, and perhaps thousands, dead.

The two sides are entrenched. Gadhafi is dug in in Tripoli and nearby cities, backed by his elite security forces and militiamen who are generally better armed than the military. His opponents, holding the east and much of the country's oil infrastructure, also control pockets in western Libya near Tripoli. They are backed by mutinous army units, but those forces appear to have limited supplies of ammunition and weapons.

Gadhafi opponents have moved to consolidate their hold in the east, centered on Benghazi - Libya's second- largest city, where the uprising began. Politicians there on Sunday set up their first leadership council to manage day-to-day affairs, taking a step toward forming what could be an alternative to Gadhafi's regime.

The opposition is backed by numerous units of the military in the east that joined the uprising, and they hold several bases and Benghazi's airport. But so far, the units do not appear to have melded into a unified fighting force. Gadhafi long kept the military weak, fearing a challenge to his rule, so many units are plagued by shortages of supplies and ammunition.

On Monday, pro-Gadhafi forces retook control of the western border crossings with Tunisia that had fallen under opposition control and they bombed an ammunition depot in the rebel-held east, residents in the area said. The Libyan Defense Ministry denied the bombing.

Regime forces also moved to tighten their ring around two opposition-controlled cities closest to the capital Tripoli - Zawiya and Misrata - where the two sides are locked in standoffs.

In Zawiya, residents said they repelled attacks by Gadhafi forces, killing 10 pro-Gadhafi soldiers and capturing about a dozen others without suffering any casualties of their own, The New York Times reported.A government spokesman confirmed the death toll, the Times said.

An Associated Press reporter saw a large, pro-Gadhafi force massed on the western edge of Zawiya, some 30 miles west of Tripoli, with about a dozen armored vehicles along with tanks and Jeeps mounted with anti-aircraft guns. An officer said they were from the elite Khamis Brigade, named after one of Gadhafi's sons who commands it. U.S. diplomats have said the brigade is the best-equipped force in Libya.

A resident of Zawiya said by telephone that fighting started in the evening and intensified after sundown when troops loyal to Gadhafi attacked the city from the west and east.

"We were able to repulse the attack. We damaged a tank with an RPG. The mercenaries fled after that," said the resident, who spoke on condition of anonymity for fear of government reprisals.

He said Gadhafi called Zawiya's influential tribal leader Mohammed al-Maktouf and warned him that if the rebels don't leave the city's main square by early Tuesday, they will be hit by warplanes. "We are expecting a major battle," the resident said.

In Misrata, Libya's third-largest city 125 miles east of Tripoli, pro-Gadhafi troops who control part of an air base on the outskirts tried to advance Monday. But they were repulsed by opposition forces, who included residents with automatic weapons and defected army units allied with them, one of the opposition fighters said.

The opposition controls most of the air base, and the fighter said dozens of anti-Gadhafi gunmen have arrived from farther east in recent days as reinforcements.

"A plane fell in the sea and we arrested five of its crew ... we have weapons trying to use to defend ourselves but it is normal weapons that cannot be compared to the planes or tanks or armored vehicles or the heavy weapons they use to bomb us," Abdullah, a witness, told Al-Jazeera.

Several residents of the eastern city of Ajdabiya said Gadhafi's air force also bombed an ammunition depot nearby held by rebels. One resident, 17-year-old Abdel-Bari Zwei, reported intermittent explosions and a fire, and another, Faraj al-Maghrabi, said the facility was partially damaged. The site contains bombs, missiles and ammunition - key for the undersupplied opposition military forces.

State TV carried a statement by Libya's Defense Ministry denying any attempt to bomb the depot. Ajdabiya is about 450 miles east of Tripoli along the Mediterranean coast.

Gadhafi supporters said they were in control of the city of Sabratha, west of Tripoli, which has seemed to go back and forth between the two camps in the past week. Several residents told the AP that protesters set fire to a police station, but then were dispersed. Anti-Gadhafi graffiti - "Down with the enemy of freedom" and "Libya is free, Gadhafi must leave" - were scrawled on some walls, but residents were painting them over.

In the capital, several people were killed and others wounded on Monday after forces loyal to Gadhafi opened fire to disperse a protest, the online edition of Quryna newspaper reported.

The protest in the Tajoura neighborhood gathered close to 10,000 protesters, the Libyan newspaper said, quoting its correspondent in the capital Tripoli.

"When the protesters reached the Souk Juma, they were joined by armed men from the Gadhafi battalion who were dressed as civilians and opened fire on the unarmed youths ... Many among the youths were wounded and killed," it said, referring to a market in Tripoli.

The report could not be immediately verified.

Global efforts to halt Gadhafi's crackdown escalated Monday.

In Washington, the Pentagon said it was moving some naval and air forces closer to Libya in case they are needed. The U.S. has a regular military presence in the Mediterranean and farther to the south has two aircraft carriers in the Persian Gulf area.

Banks froze a record $30 billion of Libyan assets over the weekend in response to an Obama administration order aimed at pressuring the regime of Gaddafi. A senior Treasury Department official said the amount was the largest total blocked by any single order ever issued by the U.S. government.

The U.S. ambassador to the United Nations, Susan Rice, said a NATO no-fly zone is under serious consideration. Rice also said Gadhafi was "delusional" in his interviews and that the fact that he could laugh with reporters while slaughtering his people showed how disconnected he is from reality.

France promised to send two planes with humanitarian aid the eastern opposition stronghold city of Benghazi, hoping to give it the momentum to oust Gadhafi. The aid to included medicine and doctors, would be the first direct Western help for the uprising that has taken control of the entire eastern half of Libya.

The EU slapped its own arms embargo, visa ban and other sanctions on Gadhafi's regime, following sanctions imposed by the U.S. and the U.N. in the past week. And Europe was also considering the imposition of a no-fly zone over Libya to prevent any air attacks by the regime on rebellious citizens.

Clinton met in Geneva with foreign ministers from Britain, France, Germany and Italy to press for tough sanctions on the Libyan government.

The Associated Press and Reuters contributed to this report.