Libyan rebels repulsed a land and air offensive by Muammar Gaddafi’s forces on Wednesday as the defiant leader warned foreign powers of “another Vietnam” if they intervened.

The U.S. government is already cautious about the prospect of imposing a “no-fly zone” over Libya, stressing the diplomatic and military risks involved, but has nevertheless moved two amphibious assault ships into the Mediterranean.

Rebels in their eastern bastion of Benghazi have called for UN-backed air strikes to halt attacks by African mercenaries they said Gaddafi is using against his own people.

Government troops, backed by air power, launched a dawn attack on Wednesday and briefly captured Brega, an oil export terminal 800 km east of Tripoli.

But opposition forces counter-attacked and took back the town they held for about a week, rebel officers said they were ready to move west toward the capital if Gaddafi refuses to quit.

However, at a gathering which was televised live, Gaddafi, who ruled Libya for 41 years, said: “Armed gangsters are behind the unrest and it is part of a conspiracy to colonise Libya and seize its oil.

“We will enter a bloody war and thousands and thousands of Libyans will die if the U.S.
enters or NATO enters.

“We are ready to hand out weapons to a million, or two million or three million, and another Vietnam will begin. It doesn’t matter to us. We no longer care about anything.”

Further bombing raids struck near the oil terminal in the afternoon. Estimates of the death toll during the day ranged between five and 14.

Gaddafi, who once said ballot box democracy was for donkeys, told the gathering in Tripoli that the world did not understand he had given power to the people long ago.

“We put our fingers in the eyes of those who doubt that Libya is ruled by anyone other than its people,” he said, referring to his system of “direct democracy” launched at a meeting attended by visiting Cuban leader Fidel Castro in 1977″.