By Michael Georgy
TRIPOLI (Reuters) - President Barack Obama said Washington and its allies were "tightening the noose" on Muammar Gaddafi, but Libyan rebels said their three-week-old uprising could fail without a no-fly zone.
The Arab League will examine a no-fly zone and extending recognition to rebels at Cairo talks Saturday, but experts said splits were likely to prevent agreement, disappointing the EU that is looking to the group to help guide its next steps.
"The chances of a clear position to be issued with consensus from the meeting tomorrow saying 'yes' to a no-fly zone and recognition of the (rebel) council is very weak," said Wahid Abdel-Meguid, an analyst at a Cairo-based political think tank.
On the eastern battlefield, Gaddafi forces, with air power and a big advantage in tanks, have pressed their advantage in the oil port of Ras Lanuf and the strategic town on Bin Jawad. The revolt in Zawiyah, west of Tripoli and held by rebels for days against fierce attacks, appeared to have been crushed.
"Across the board we are slowly tightening the noose on Gaddafi. He is more and more isolated internationally," Obama said. "I have not taken any options off the table."
European Union leaders meeting in Brussels said they would consider all options to force the Libyan leader to step down.
However, the 27 leaders meeting in Brussels stopped short of endorsing air strikes, a no-fly zone or other military-backed means to achieve that goal. Libyan rebels said their three-week-old insurrection could fail without a no-fly zone.
The summit sidestepped a British and French initiative for a U.N. Security Council resolution to authorize a no-fly zone.
They also would not back French President Nicolas Sarkozy's call to follow his lead and recognize the National Libyan Council as the country's legitimate authority, or his call for "defensive" air strikes against Gaddafi forces if they used chemical weapons or warplanes against civilians.
Libya suspended diplomatic relations with France.
Obama, accused by critics of reacting too slowly, told a news conference he believed international sanctions, an arms embargo and other measures already in place were having an impact but also said a no-fly zone remained an option.
Soon after he spoke, the U.S. Treasury Department said it had extended a freeze on assets to Gaddafi's wife, four of his sons and four senior officials in his government.
On the diplomatic front, the African Union said the leaders of South Africa, Uganda, Mauritania, Congo and Mali will form a panel that will travel to Libya shortly.
"The ad hoc committee was set up ... to engage with all parties in Libya, facilitate in an inclusive dialogue among them, and engage AU partners ... for the speedy resolution of the crisis in Libya," the bloc said.
TANKS AND AIR POWER
Gaddafi's forces appeared to be maintaining the momentum on the ground. The sound of explosions and small arms fire came from the oil port of Ras Lanuf Friday as government troops landed from the sea, backed by tanks and air power.
Rebels had advanced to the small town of Bin Jawad about 60 km (38 miles) west of Ras Lanuf a week ago, but have been driven back across the strip of desert and scrub. Though out-gunned, they have kept up stiff resistance.
"Ras Lanuf is a ghost town. There are skirmishes between rebels and Gaddafi forces going back and forth," said rebel captain Mustafa al-Agoury, adding that rebels were positioned on the east and Gaddafi's forces on the west of the town.
Neither side had full control. Libyan state television said the town was cleared of "armed gangs" opposed to Gaddafi and a spokesman for the rebel movement, Hamid al-Hasi, told Al Arabiya that Ras Lanuf was back in rebel hands.
Gaddafi's warplanes were carrying out air strikes seemingly unhindered by insurgent anti-aircraft guns mounted on pick-up trucks.
Many rebels were angry at international inaction.
"Where is the West? How are they helping? What are they doing," shouted one angry fighter.
In Tripoli, Libyan security forces used teargas and fired in the air to disperse worshippers near a mosque before they could even attempt any protest, a Libyan man said, citing witnesses.
It was impossible to verify reports about what was happening in the Tajoura district of Tripoli because foreign journalists were prevented from reporting from the area and local anti-Gaddafi activists were not answering phone calls.
Foreign journalists brought to the city center of Zawiyah by government forces Friday saw buildings scorched, patches of fresh paint and loyalists chanting "I love Gaddafi."
HOTEL BURNED OUT
A hotel on the square that had been the rebel command center stood burned out, now guarded by Gaddafi militiamen. Facades not covered by large cloths were pockmarked by bullets from days of battles around the space the rebels called Martyrs' Square.
"There were bad guys inside. There were 35-40 guys there yesterday with Kalashnikovs and big guns," said Waleed, one militiaman, pointing toward the building's ruined facade.
"We cannot live without Gaddafi. He is the king of Africa, not just Libya."
The only town holding out in western Libya was Misrata, about 200 km (125 miles) east of Tripoli and with a population of about 300,000. It was calm Friday, but rebels said they were expecting an attack shortly.
Libya's insurgent leader said any delay in imposing a no-fly zone could let Gaddafi regain control. "We ask the international community to shoulder their responsibilities," Mustafa Abdel-Jalil, head of the rebels' National Libyan Council, said.
"The Libyans are being cleansed by Gaddafi's air force. We asked for a no-fly zone to be imposed from day one, we also want a sea embargo," he said.
About 15,000 worshippers gathered outside the courthouse that has become the council's headquarters in the rebel stronghold of Benghazi.
"Help us to become a democratic country," said one banner strung between lampposts and written in English and Arabic.
(Additional reporting by Maria Golovnina in Zawiyah, Mohammed Abbas in Brega, Tom Pfeiffer in Benghazi, Luke Baker, David Brunnstrom, Missy Ryan, Lucien Toyer, James Mackenzie and Justyna Pawlak in Brussels, Paul Eckert and Tabassum Zakaria in Washington, Stefano Ambrogi and Olesya Dmitracova in London, John Irish in Paris, Stephanie Nebehay in Geneva, Harry Papachristou in Athens; Writing by Peter Millership; Editing by Matthew Jones)