Brega, Libya: Muammar Gaddafi's forces struck at rebel control of oil export hubs in Libya's east for a second day on Thursday as Arab states weighed a plan to end turmoil that Washington said could make the nation 'a giant Somalia'.
A leader of the uprising against Gaddafi's 41-year-old rule said he would reject any proposal for talks with Gaddafi to end the conflict in the world's 12th largest oil exporting nation.
Witnesses said a warplane bombed the eastern oil terminal town of Brega, a day after troops loyal to Gaddafi launched a ground and air attack on the town that was repulsed by rebels spearheading a popular revolt against his four-decade-old rule. The rebels, armed with rocket launchers, anti-aircraft guns and tanks, called on Wednesday for U.N.-backed air strikes on foreign mercenaries it said were fighting for Gaddafi.
Rebels called on Thursday for a no-fly zone, echoing a demand by Libya's deputy U.N. envoy, who now opposes Gaddafi.
"Bring Bush! Make a no fly zone, bomb the planes," shouted soldier-turned-rebel Nasr Ali, referring to a no-fly zone imposed on Iraq in 1991 by then U.S. President George Bush.
But perhaps mindful of a warning by Gaddafi that foreign intervention could cause 'another Vietnam', Western officials expressed caution about any sort of military involvement including the imposition of a no-fly zone.
A rebel officer said government air strikes targeted the airport of Brega and a rebel position in the nearby town of Ajdabiyah, referring to two rebel-held locations.
Opposition soldiers also said troops loyal to Gaddafi had been pushed back to Ras Lanuf, home to another major oil terminal and 600 km (375 miles) east of Tripoli.
"Gaddafi's forces are in Ras Lanuf," Mohammed al-Maghrabi, a rebel volunteer, said, echoing comments by others.
In an angry scene at al-Ugayla, east of Ras Lanuf, a rebel shouted inches from the face of a captured young African and alleged mercenary: "You were carrying guns, yes or no? You were with Gaddafi's brigades yes or no?"
The silent youth was shoved onto his knees into the dirt. A man held a pistol close to the boy's face before a reporter protested and told the man that the rebels were not judges.
The uprising, the bloodiest yet against long-serving rulers in the Middle East and North Africa, is causing a humanitarian crisis, especially on the Tunisian border where tens of thousands of foreign workers have fled to safety.
Revolt has torn through the OPEC-member country and knocked out nearly 50 per cent of its 1.6 million barrels per day output, the bedrock of the country's economy.
As the struggle between Gaddafi loyalists and rebels who have taken swathes of Libya intensified, Arab League Secretary-General Amr Moussa said a peace plan for Libya from Venezuela's President Hugo Chavez was under consideration.
"We have been informed of President Chavez's plan but it is still under consideration," Moussa said on Thursday. "We consulted several leaders yesterday," he added.
Moussa said he had not agreed to the plan and did not know whether Gaddafi had accepted it.
Oil fell on news of the plan. Brent crude fell more than $3 to $113.09 per barrel as investors eyed a possible deal brokered by Chavez, a close friend of Gaddafi.
Al Jazeera news said Chavez's plan would involve a commission from Latin America, Europe and the Middle East trying to reach a negotiated outcome between the Libyan leader and rebel forces.
The network said the chairman of the rebels' National Libyan Council, Mustafa Abdel Jalil, rejected any talks with Gaddafi.
On the Tunisian border, the mood was volatile despite efforts to provide transport for the thousands of migrant workers stranded in Tunisia after crossing over from Libya.
In a push east, government troops, backed by air power, on Wednesday briefly captured Brega.
Opposition forces rapidly took back the town they had held for about a week, rebel officers said. They were ready to move west toward the capital, they said, if Gaddafi refused to quit.
Basking in the adulation of loyalists in Tripoli on Wednesday, Gaddafi launched into a tirade against the 'armed gangsters' he said were behind the unrest, part of a conspiracy to colonize Libya and seize its oil.
"We are ready to hand out weapons to a million, or 2 million or 3 million, and another Vietnam will begin," Gaddafi told Tripoli supporters at a gathering televised live.
Secretary of State Hillary Clinton said in Washington that one of the biggest U.S. concerns was 'Libya descending into chaos and becoming another Somalia'.
The Libyan government has tried to persuade people in Tripoli that life continues as normal, but the crisis was affecting everyday life.
There were queues outside banks and residents said food prices had gone up, while the street value of the Libyan dinar had fallen dramatically against the dollar.
A fish market near Tripoli's central Green Square was mostly empty. A customer who came looking for fresh fish went away empty-handed.
"The situation is affecting us," said Ismail, a fisherman. "All the Egyptian workers who run the boats have left."
DUTCH SOLDIERS HELD
In the opposition stronghhold of Benghazi, groups of men of all ages were gathered in the shade of tarpaulin awnings next to the courthouse engaged in fierce debates, enjoying their new-found freedom of speech.
"We must go to Tripoli and get rid of Gaddafi," shouted one, to murmurs of approval from those around him.
"But we have only our shirts to protect us from the cannon," said Ahmed el Sherif, 60, standing on the edge of the group.
The men broke into song: "only our revolution is legitimate, not Gaddafi's!" they sing, and "Muammar is a donkey."
The Dutch Defense Ministry said Libyan authorities had arrested three Dutch soldiers on Sunday when they tried to evacuate a Dutch citizen from Sirte, east of Tripoli.
Libya's deputy ambassador to the United Nations, one of the first Libyan diplomats to denounce Gaddafi and defect, said the United Nations may back a resolution for a no-fly zone if the rebel's leadership council requested it officially.
The U.S. government is cautious about imposing a no-fly zone, stressing the diplomatic and military risks involved, but has moved warships into the Mediterranean.
Any sort of foreign military involvement in Arab countries is an awkward subject for Western nations keenly aware that Iraq was plunged into years of bloodletting and al Qaeda violence after a 2003 U.S.-led invasion toppled Saddam Hussein.
Spain became the latest European country to offer help to refugees, saying it would send a plane loaded with humanitarian aid to the Tunisian-Libyan border on Thursday. The plane will be used to ferry Egyptian migrants from Djerba to Cairo.