By Mohammed Abbas
BREGA, Libya (Reuters) - Libyan rebels repulsed a land and air offensive by Muammar Gaddafi's forces as the defiant leader warned foreign powers of "another Vietnam" if they intervened in his country's popular uprising.
Rebels in their eastern bastion of Benghazi called for U.N.-backed air strikes to halt attacks by African mercenaries they say Gaddafi is using against his own people.
Government troops, backed by air power, launched an attack on Wednesday and briefly captured Brega, an oil export terminal 800 km (500 miles) east of Tripoli.
Opposition forces took back the town they have 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, Gaddafi, Libya's leader for the last 41 years, 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 will enter a bloody war and thousands and thousands of Libyans will die if the United States enters or NATO enters," Gaddafi told Tripoli supporters at a gathering televised live.
"We are ready to hand out weapons to a million, or 2 million or 3 million, and another Vietnam will begin."
Further bombing raids struck near the oil terminal on Wednesday. Estimates of the day's death toll ranged from 5-14.
Oil prices held near 2- year highs on Thursday due to fears the unrest could spread to other OPEC producers.
Gaddafi told the gathering in Tripoli: "We put our fingers in the eyes of those who doubt that Libya is ruled by anyone other than its people," referring to his system of "direct democracy" launched in 1977.
A Tripoli resident and Gaddafi opponent, who did not want to be identified, told Reuters afterwards: "Gaddafi will hang on for a while. It's not going to be easy for an unarmed crowd to face highly armed forces eager to shoot their own people."
Venezuela's President Hugo Chavez spoke with Gaddafi by telephone on Tuesday and offered to form a commission to negotiate an end to the crisis in Libya, Venezuela's information minister said in a Twitter message.
The assault on Brega appeared to be the most significant military operation by Gaddafi since the uprising erupted in mid-February and set off a confrontation that Washington says could descend into a long civil war unless Gaddafi steps down.
Witnesses said the attack was backed by heavy weapons and air strikes. One said Gaddafi's forces were 2-3 km from the city center and had 300-350 rebels pinned down at an oil industry airport on the city outskirts.
Hisham Mohammed, a 33-year-old mechanic on the side of the rebels, was defiant: "I'm going to Brega to help our brothers there. I'm washed, I've prayed, and I'm ready to go to God."
Analysts cautioned against drawing firm conclusions from fast moving events in a situation of erratic communications.
"We should keep in mind that both the government and the rebels are trying to spin an image of momentum," said Shashank Joshi, an analyst at Britain's Royal United Services Institute.
In Benghazi, the rebel National Libyan Council called for air strikes. Spokesman Hafiz Ghoga said: "We call for specific attacks on strongholds of these mercenaries. The presence of any foreign forces on Libyan soil is strongly opposed. There is a big difference between this and strategic air strikes."
In a possible response to Western hints that the opposition needs to unify to facilitate rebel links with outside powers, Ghoga said a former justice minister, Mustafa Abdel Jalil, would be chairman of the council which will have 30 members and be based in Benghazi before moving later to Tripoli.
Libya's deputy ambassador to the United Nations, one of the first Libyan diplomats to denounce Gaddafi and defect, said the U.N. may back a resolution for a no-fly zone if the National Libyan Council requested it officially.
The U.S. government is cautious about imposing a no-fly zone over Libya, stressing the diplomatic and military risks involved, but has moved warships into the Mediterranean.
Any sort of foreign military involvement in Arab countries is a sensitive topic for Western nations uncomfortably aware that Iraq suffered years of bloodletting and al Qaeda violence after a 2003 U.S.-led invasion toppled Saddam Hussein.
The Arab League said it was against direct outside military intervention, but could enforce a no-fly zone in cooperation with the African Union. Realistically though, only the United States could carry out such an operation.
U.S. Secretary of State Hillary Clinton said U.S. military assets could be used to support the movement of supplies to areas in need but a no-fly zone was not an immediate priority. "I think we are a long way from making that decision," she told a Senate hearing.
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 are trying to flee to safety.
Spain became the latest European country to offer help, 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.
(Additional reporting by Yvonne Bell and Chris Helgren in Tripoli, Tom Pfeiffer, Alexander Dziadosz in Benghazi, Yannis Behrakis and Douglas Hamilton; Christian Lowe and Hamid Ould Ahmed in Algiers, Souhail Karam and Marie-Louise Gumuchian in Rabat; Writing by William MacLean and Janet Lawrence; Editing by Robert Birsel)