By Samia Nakhoul and Mohammed Abbas
TRIPOLI (Reuters) - Muammar Gaddafi urged his supporters from hiding to fight on as Libya's new interim rulers met world leaders on Thursday to discuss reshaping a nation torn by 42 years of one-man rule and six months of civil war.
"Let it be a long battle. We will fight from place to place, from town to town, from valley to valley, from mountain to mountain," Gaddafi said in a message relayed by satellite TV on the anniversary of the coup that brought him to power in 1969.
"If Libya goes up in flames, who will be able to govern it? Let it burn," he said with his trademark verbal flamboyance.
In further comments broadcast later, he vowed to prevent oil exports, in the kind of threat that stirs fears of an Iraq-style insurgency: "You will not be able to pump oil for the sake of your own people. We will not allow this to happen," Gaddafi said. "Be ready for a war of gangs and urban warfare."
Amid conflicting reports of where the 69-year-old fugitive might be, a commander in the forces of the new ruling council said he had fled to a desert town south of the capital, one of several tribal bastions still holding out.
Seeking to avoid more bloodshed, opposition forces also extended by a week a deadline for Gaddafi's hometown of Sirte, on the coast, to surrender.
Meeting the National Transitional Council in Paris at the invitation of France and Britain, prime backers of the Libyan uprising which followed other Arab Spring revolts, Western powers said Gaddafi was still a threat, but handed the NTC $15 billion of his foreign assets to start the job of rebuilding.
"The world bet on the Libyans and the Libyans showed their courage and made their dream real," Mahmoud Jibril, the prime minister in the interim government, said as NATO air forces maintained support for NTC fighters on the frontlines in Libya.
CLINTON: "WE WILL BE WATCHING"
A history of tribal, ethnic and regional friction as well as divisions during the rebellion have created a wariness among Libyans and abroad about the ability of the new leaders to introduce the stable democracy that is the declared goal for the potentially oil-rich nation of six million.
U.S. Secretary of State Hillary Clinton said in Paris: "The work does not end with the end of an oppressive regime. Winning a war offers no guarantee of winning the peace that follows."
"We will be watching and supporting Libya's leaders as they keep their stated commitments to conduct an inclusive transition, act under the rule of law and protect vulnerable populations," she added, pledging to continue military support and calling on Gaddafi and his entourage to give themselves up.
Clinton also urged the new leaders to work with those who once supported Gaddafi -- something the prime minister in the ousted government, al-Baghdadi Ali al-Mahmoudi, said he was also doing, according to a report by al-Arabiya television.
Other powers, notably Russia and China, have been slower to warm to Gaddafi's enemies but attended the Paris conference as international competition warms up for a share of contracts in rebuilding Libya and in exploiting its big oil and gas reserves.
Russia recognised the NTC as Libya's government on Thursday.
Given sensitivities among Arabs and Muslims after Western campaigns in Iraq and Afghanistan, British Prime Minister David Cameron was at pains to stress that Libyans were in charge of their own fate.
"This is not being dropped out of a NATO aeroplane, this is being delivered by the Libyan people," he said. "It is their revolution, it is their change."
"GADDAFI IN BANI WALID"
Abdel Majid Mlegta, coordinator of the Tripoli military operations room for the NTC, told Reuters "someone we trust" had said Gaddafi fled to Bani Walid, 150 km (95 miles) southeast of the capital, three days after Tripoli fell. With him were his son Saif al-Islam and intelligence chief Abdullah al-Senussi, all three of them facing international war crimes charges.
An Algerian newspaper said Gaddafi was in the border town of Ghadamis and phoned Algerian President Abdelaziz Bouteflika to appeal for refuge. Bouteflika did not take the call, though Algeria has taken in Gaddafi's wife and three of his children.
Mlegta said Gaddafi was planning a fightback from Bani Walid but that appeals to notables in the town to hand over Gaddafi had gone unanswered. He ruled out attacking the town because of tribal ties shared by its residents and many NTC fighters.
Independent reports from Sirte and Bani Walid have not been available with communications cut. NTC commanders say residents are running low on supplies but many remain loyal to Gaddafi.
Mohammed Zawawi, an NTC spokesman in the eastern city of Benghazi, said extending a deadline for surrender until next Saturday would save lives.
"We're not in a rush to get in to Sirte," he said. "We're not going to lose casualties for it."
In the desert east of Bani Walid, a Reuters correspondent saw columns of anti-Gaddafi forces on patrol but found fighters unready to mount an offensive yet.
"Right now we are waiting. Everyone is ready to fight. Sirte will be liberated first, then Bani Walid," said fighter Ibrahim Obaidr.
TRIPOLI SHORT OF WATER
In Tripoli, two million residents are starting to see new supplies of food, and fuel supplies are adequate but there is no end in sight to a water shortage caused in part by pro-Gaddafi forces being in control of facilities inland, EU officials said.
For many of its inhabitants, it was the first September 1 they could remember when they had not been forced to celebrate the 1969 coup against King Idris which put a 27-year-old army captain called Muammar Gaddafi in charge of their lives.
At Tripoli's Green Square, once the stage for his parades and now renamed Martyrs Square, there no crowds, only casual passers-by and men gathering spent bullet casings for scrap.
Many hope for better under the new leadership, but remain bitter about the past. Riding through the square on his bicycle, teacher Mohammed Ali lamented Libya's recent history: "People reached the moon in 1969, and we got Gaddafi."
(Additional reporting by Mohammed Abbas and Christian Lowe in Tripoli, Maria Golovnina in Misrata, Emma Farge, Robert Birsel and Alex Dziadosz in Benghazi, Richard Valdmanis, Marie-Louise Gumuchian, Giles Elgood and Alastair Macdonald in Tunis, Justyna Pawlak in Brussels, Catherine Bremer, Brian Love, John Irish and Keith Weir in Paris; Writing by Alistair Lyon and Alastair Macdonald)