By Mohammed Abbas and Alexander Dziadosz
RAS LANUF, Libya (Reuters) - Libyan tanks fired on rebel positions in the oil port of Ras Lanuf and warplanes hit another oil hub further east on Thursday as Muammar Gaddafi carried counter-attacks deeper into the insurgent heartland.
State television said in late afternoon that the army had driven rebels out of Ras Lanuf. The insurgents denied it, but said government forces were heavily bombarding it and thrusting well into the Mediterranean coastal town.
The rebels took an important step toward international legitimacy when France recognized their national council. But while NATO and the EU discussed what measures they might take, the U.S. director of national intelligence forecast that a well-equipped Gaddafi would prevail over the rebels in the end.
European Union foreign ministers could not agree at their Brussels meeting over whether the 27-member bloc as a whole should recognize the anti-Gaddafi movement, although they did decide to tighten punitive sanctions on Gaddafi's government.
The EU ministers also urged Gaddafi to quit immediately.
At parallel talks, NATO foreign ministers discussed imposing a "no-fly" zone over Libya to stop the government using jets and helicopters against the outgunned rebels, who seized a string of cities east and west of Tripoli early in the three-week-old war to end Gaddafi's 41 years of iron-fisted rule.
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.
EU diplomats explained that a legal basis would require evidence of war crimes by Gaddafi's forces against civilians, of which there are unconfirmed reports but no documented evidence.
Rasmussen also saw the risk of Libya becoming a divided, failed state that could become a haven for terrorists. "We strongly urge the government of Libya to stop violence and allow a peaceful transition to democracy," he said.
Despite rebel appeals to take the skies away from Gaddafi's forces, 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.
Establishing a no fly zone would be an act of war as it would require knocking out Libya's air defense system. It is the second largest in the Middle East, with 31 major surface-to-air missile sites, the U.S. intelligence chief said on Thursday.
While oil prices have been kept high by the bombardments in the east of the Arab North African state, there was no clear sign of deliberate intent by Gaddafi to ruin oil infrastructure.
GADDAFI PIERCING REBEL HEARTLAND
More than 500 km (300 miles) east of his main bastion in the capital Tripoli, Gaddafi's warplanes and gunboats off-shore bombarded rebels in Ras Lanuf. Projectiles crashed near a Libyan Emirates Oil Refinery Company building.
At least two tanks were seen bearing down on ragged rebel lines outside Ras Lanuf and opening fire.
Rebel fighters said Ras Lanuf's residential district, including the vicinity of its hospital, came under bombardment and one said government forces were advancing into the area, backed by rocket fire from sea, air and ground.
Insurgents 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 hinterland.
Insurgents fired anti-aircraft guns toward warplanes and rockets out to sea toward navy ships, without visible effect.
GADDAFI WILL PREVAIL--US SPY CHIEF
Gaddafi is "hunkering down," showing no inclination to cede power, and "we believe Gaddafi is in this for the long haul," U.S. Director of National Intelligence James Clapper told a U.S. Senate hearing.
Clapper said he expected Gaddafi's forces, with better equipment and logistics, would prevail over the long term.
Libyan state television said rebels were ousted on Thursday from the port and airport of Es Sider, a further oil terminus about 40 km (25 miles) up the coast west of Ras Lanuf.
OPEC member Libya was turning away tankers from ports as storage depots dried up because of supply disruptions caused by the fighting. Libya's oil trade has virtually been paralyzed as banks refuse to clear payments in dollars due to U.S. sanctions, cutting off major 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.
FADING REBEL FORTUNES?
The rebels, hitherto bursting with confidence that they would soon charge hundreds of km (miles) up the coast, overwhelming any resistance, to capture Gaddafi's main bastion Tripoli, now 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 beleaguered cohorts.
Gaddafi's counter-offensive has stymied a rebel advance from their eastern power base of Benghazi. They were forced to withdraw from the front-line town of Bin Jawad, just west of Ras Lanuf, after coming under heavy shelling earlier this week.
In the west, Gaddafi's army laid siege to try to starve out insurgents clinging to parts of the shattered city of Zawiyah, strategically significant because it is close to his powerbase in the capital Tripoli, after fierce see-saw battles this week.
One fighter said rebels had retaken the heart of Zawiyah, the closest city -- 50 km (30 miles) west -- to Tripoli, from the army overnight. Zawiyah's center appeared to change hands twice during the day in a fierce battle.
A doctor in a Tripoli hospital said up to 50 wounded government soldiers had been brought in from Zawiyah.
Mohamed, a Libyan in exile abroad who got through to a relative on the outskirts of Zawiyah on Thursday morning, said it was simply not clear who was winning the battle for the city but the army had it under siege to break the rebels' will.
"Yesterday (rebel sympathizers) tried to bring food and medicine from Subratha but failed. Government troops surround Zawiyah from everywhere. It is unclear who controls the center. It changes all the time. It's street to street fighting."
Authorities have kept journalists away from Zawiyah.
France became the first significant country on Thursday to recognize the rebel Libyan National Council as the legitimate representative of the Libyan people. An aide to President Nicolas Sarkozy said an ambassador would go to Benghazi and a Libyan envoy would be received in Paris.
Britain's Foreign Office suggested it could make the same opening as France, saying Libyan National Council members were "valid interlocutors" and Gaddafi should step down now.
U.S. Secretary of State Hillary Clinton said she would meet Libyan opposition figures in the United States and during a trip to Egypt and Tunisia, Libya's neighbors, next week.
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.
ICRC President Jakob Kellenberger called on Libyan authorities to grant the humanitarian agency access to western areas including the capital Tripoli and reminded both sides that civilians and medical facilities must not be targeted.
(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 Mark Heinrich; editing by Giles Elgood)