By Maria Golovnina and Michael Georgy
TRIPOLI (Reuters) - Troops loyal to Muammar Gaddafi launched counter-offensives against rebel-held towns on Sunday, increasing fears that Libya is heading for a civil war rather than the swift revolutions seen in Tunisia and Egypt.
The Gaddafi government proclaimed sweeping overnight victories over what it called terrorist bands.
But after what residents said was a day of fierce fighting with artillery, rockets and mortar bombs, rebel forces announced they had fought off Gaddafi's forces in the towns of Zawiyah, to the immediate west of Tripoli, and Misrata to the east.
"Today Misrata witnessed the toughest battle since the beginning of the revolution. Horrible attacks," one resident, who did not want to give his name, told Reuters by phone.
"They came from three sides and managed to enter the town from the west and south but when they reached the center of Misrata the rebels pushed them back," he said.
Misrata, with a population of 300,000, is the largest town controlled by rebels outside the rebel-held east of the country.
If rebel soldiers were able to continue their fitful advance westwards, Misrata could be a stepping stone to reaching the capital, Gaddafi's principal stronghold.
Rebel council spokesman Hafiz Ghoga told a Benghazi news conference: "We would like to put the people of this great nation at ease...because the regime is spreading rumors.
"Both Zawiyah and Misrata are secured, liberated cities."
Gaddafi's troops, backed by tanks, artillery, warplanes and helicopters attacked positions near the oil port of Ras Lanuf, 660 km (410 miles) east of the capital.
Rebels were forced to retreat from Bin Jawad which is on the road to Sirte, the hometown of Gaddafi who has ruled the OPEC oil and gas producer for 41 years.
"Gaddafi's cut us to pieces. He's firing on us with tanks and missiles. I don't know what we're going to do now," Momen Mohammed told Reuters.
One fighter returning wounded to Ras Lanuf from Bin Jawad was asked what he had seen.
"Death," he replied, too distraught to say any more.
Rebels said they planned another attack on Bin Jawad, which is only 160 km (100 miles) from Sirte, on Monday morning.
Rebel commanders told Reuters Gaddafi's forces were reinforcing Sirte where they had more than 20,000 fighters. They said the city houses the Saadi (a son of Gaddafi) battalion which includes four brigades, as well as armed tribe members.
Loyalists had poured into the streets of Tripoli at dawn on Sunday firing into the air and holding portraits of Gaddafi.
"These are celebrations because government forces have taken control of all areas to Benghazi and are in the process of taking control of Benghazi," spokesman Mussa Ibrahim said, referring to Libya's second city, situated in the far east.
But the celebrations appeared to be premature as Benghazi remained firmly under rebel control while insurgents stood their ground at Zawiyah and Misrata.
Rebels surrounded by troops near the center of Zawiyah, 50 km (30 miles) west of Tripoli, faced another attack after repelling two assaults by tanks and infantry the day before.
"This morning, there was a new attack, bigger than yesterday. There were one and a half hours of fighting ... Two people were killed from our side and many more injured," spokesman Youssef Shagan said by telephone.
Elite brigades under Gaddafi's son Khamis also launched an assault on Misrata, 200 km (125 miles) east of the capital.
"The brigades tried to reach the center of the town but revolutionaries managed to repel them. They retreated to the airbase," said a resident who declined to be named.
"The revolutionaries captured 20 soldiers and seized a tank. The town is now fully in the control of the youths," he said.
At least 18 people, including a baby, were killed in the fighting in Misrata on Sunday, a doctor told Reuters by phone.
"We have 18 martyrs but the figure is not final. We also have many people wounded, I cannot even count them," said the doctor, who works at Misrata main hospital, adding that the dead included rebels and civilians.
Doctors at Ras Lanuf hospital said two dead and 22 wounded had arrived from the fighting. A French journalist was shot in the leg, a doctor said, and four rebels were seriously wounded and unlikely to survive.
BRITISH TROOPS SEIZED
Britain's Foreign Secretary William Hague said on Sunday that what he called a British diplomatic team that had been captured in the eastern city of Benghazi had now left Libya.
The Sunday Times earlier reported a British Special Air Service (SAS) unit had been captured during a secret diplomatic mission to make contact with opposition leaders backfired.
"They (the rebel army) did capture some British special forces. They could not ascertain if they were friends or foes. For our safety we are holding them and we expect this situation to be resolved soon," a rebel source in Benghazi said earlier.
Western leaders have denounced what they call Gaddafi's brutal response to the uprising, and the International Criminal Court said he and his inner circle face investigation for alleged targeting of civilians by his security forces.
German Foreign Minister Guido Westerwelle said in a newspaper on Sunday that the United Nations security council should launch fresh sanctions against Gaddafi.
"Selective sanctions are necessary against those who are responsible for crimes against the Libyan people," he told the Welt am Sonntag newspaper. "The flow of money must be cut off."
The International Energy Agency said the revolt had blocked about 60 percent of Libya's 1.6 million bpd oil output. The drop, due largely to the flight of thousands of foreign oil workers, will batter the economy and have already jacked up crude prices abroad..
(Additional reporting by Michael Georgy in Tripoli, Alexander Dziadosz in Ajdabiya, Mohammed Abbas in Bin Jawad, Stefano Ambrogi in London, Nick Vinocur in Paris and Tom Pfeiffer in Benghazi; Writing by Diana Abdallah; Editing by Ralph Boulton)