By Michael Georgy and Maria Golovnina
TRIPOLI (Reuters) - Libyan leader Muammar Gaddafi is ready to unleash the full might of his forces to crush a three-week-old insurrection, his son said on Thursday as warplanes and tanks struck at the country's rebel-controlled east.
"It's time for liberation. It's time for action. We are moving now," Saif al-Islam told Reuters in an interview. "Time is out now...we gave them two weeks (for negotiations)."
As he spoke, Gaddafi's forces intensified their counter-attack on the insurgent heartland, bombarding rebel positions in the oil port of Ras Lanuf. Warplanes also hit Brega, another rebel-held oil hub further east.
State television said the army had driven the rebels out of Ras Lanuf, just behind their frontline but the rebels denied it.
Gaddafi forces and rebels were locked in street fighting in the western town of Zawiya, close to Tripoli, which has changed hands several times in recent days. Residents described scenes of carnage, with woman and children among the dead.
With momentum appearing to turn against the rebels, who had initially hoped to charge up the coast and into the capital Tripoli, foreign governments held more meetings where they again called for Gaddafi to surrender.
But they came no closer to deciding on action to rein him in. The United States and NATO's head expressed doubt over the wisdom of imposing "no-fly zones" without full international backing and a legal justification.
In a further dent to rebel morale, U.S. Director of National Intelligence James Clapper said in Washington that Gaddafi was "in this for the long haul" and was likely to prevail. The London-educated Saif al-Islam Gaddafi, previously seen as a potential reformer, said in the interview that Libya would defeat the rebels even if Western powers intervened.
"We will never ever give up. We will never ever surrender. This is our country. We fight here in Libya," he said, speaking in a compound in Tripoli. "Libya is not a piece of cake."
He described rebels fighting to end Gaddafi's 41-year rule as terrorists and armed gangsters and said thousands of Libyans had volunteered to fight them.
BOMBARDED FROM AIR AND SEA
More than 500 km (300 miles) east of Gaddafi's stronghold, warplanes and gunboats bombarded rebels in Ras Lanuf. Missiles crashed near a Libyan Emirates Oil Refinery Company building.
Rebel fighters said Ras Lanuf's residential district, including the hospital area, weathered a bombardment and one said government forces were advancing into the area, backed by rocket fire from sea, air and ground.
Rebels also reported an air strike on Brega, another oil port 90 km (50 miles) east of Ras Lanuf, indicating that Gaddafi loyalists had not only halted a westwards insurgent push in its tracks but were making inroads into their eastern rearguard.
They fired anti-aircraft guns toward warplanes and rockets out to sea toward navy ships, without visible effect.
State television said rebels were ousted on Thursday from the port and airport of Es Sider, another oil terminus about 40 km (25 miles) up the coast west of Ras Lanuf.
The poorly-equipped rebels conceded they were struggling to hold ground against the government's vastly superior firepower.
"(Gaddafi) might take it. With planes, tanks, mortars and rockets, he might take it," said rebel fighter Basim Khaled.
"A no-fly zone would be great," said rebel fighter Salem al-Burqy, echoing the view of many comrades.
In the west, Gaddafi's troops laid siege to try to starve out insurgents clinging to parts of the shattered city of Zawiyah after see-saw battles this week.
One fighter said rebels had retaken the heart of Zawiyah from the army overnight. Authorities have kept journalists away from the town, about 50 km (30 miles) west of Tripoli.
The rebels received a boost in their quest for international legitimacy when France recognized their national council.
An aide to President Nicolas Sarkozy said an ambassador would go to Benghazi and a Libyan envoy would be received in Paris.
But European Union foreign ministers could not agree at a meeting in Brussels over whether the bloc as a whole should recognize the Benghazi-based rebel movement, although they did decide to tighten sanctions on Gaddafi's government.
In separate talks, NATO foreign ministers discussed imposing a "no-fly" zone over Libya to stop the government using jets and helicopters against the outgunned rebels.
URGING BUT NO ACTION
But NATO Secretary-General Anders Fogh Rasmussen said this could happen only with a demonstrable need, a clear legal basis and firm regional support, not all of which now apply. This would require evidence of war crimes against civilians.
"We strongly urge the government of Libya to stop violence and allow a peaceful transition to democracy," he said.
Despite rebel appeals for foreign air power to guard the shies, no quick action had been expected as NATO leaders want broader U.N. endorsement for political cover. Russia and China oppose such intervention and would have a veto in any U.N. vote.
U.S. Secretary of State Hillary Clinton underscored the need for international consensus on the next steps on Libya.
"Absent international authorization, the United States acting alone would be stepping into a situation whose consequences are unforeseeable," Clinton said.
She also expressed deep doubts about proposals to set up a "no-fly" zone over Libya, saying previous such zones set up over Iraq and Serbia had had little effect.
In Geneva, the International Committee of the Red Cross said Libya had descended into civil war with increasing numbers of wounded civilians arriving in hospitals in the east.
Libya was also turning away tankers from ports as storage depots dried up because of supply disruptions caused by the fighting. Libya's oil trade has been virtually paralyzed as banks refuse to clear payments in dollars due to U.S. sanctions, cutting off big importers such as Italy and France.
The intensified fighting near oil installations kept crude prices hovering near recent 2.5-year highs, with Brent crude trading at $114.55 a barrel.
(Additional reporting by Tom Pfeiffer in Benghazi, Luke Baker, David Brunnstrom, Missy Ryan and Lucien Toyer in Brussels, Paul Eckert and Tabassum Zakaria in Washington, Stefano Ambrogi and Olesya Dmitracova in London, John Irish in Paris, Stephanie Nebehay in Geneva; writing by Angus MacSwan; editing by Philippa Fletcher)