Muammar Gaddafi launched an offensive to retake territory in Libya's east on Wednesday, sparking a rebel warning that foreign armed forces might be needed to "put the nail in his coffin" and end his long rule.
The veteran ruler twinned the attack with a populist propaganda broadside against the rebels at a televised meeting, playing to nationalist opinion by saying a lot of blood would be shed if foreign powers intervened in the country's crisis.
Government troops briefly captured Marsa El Brega, an oil export terminal, before being driven back by rebels who have controlled the town 800 km (500 miles) east of the capital Tripoli for about a week, rebel officers said.
Their account was contradicted by Libyan state TV, which said Gaddafi's forces held the airport and seaport.
The veteran leader told the televised gathering the world did not understand that he had given power to the people long ago.
"We put our fingers in the eyes of those who doubt that Libya is ruled by anyone other than its people," he said at a Tripoli gathering broadcast live on Libyan television, referring to his system of "direct democracy" launched at a meeting attended by visiting Cuban leader Fidel Castro in 1977. Referring to an unprecedented two-week-old popular uprising against his rule, Gaddafi also called for the United Nations and NATO to probe the facts about what had happened in Libya, and said he saw a conspiracy to colonize Libya and seize its oil.
The assault 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 the veteran strongman steps down.
But analysts cautioned against drawing firm conclusions from fast moving events in a situation of erratic communications.
"The attack reinforces the idea that the government is capable of projecting power far into the east," said Shashank Joshi, an analyst at Britain's Royal United Services Institute.
"But we should keep in mind that both the government and the rebels are trying to spin an image of momentum.
"Bear in mind that in the area around Tripoli, where the government has more forces to draw on, we see government offensives still being blunted quite easily."
The rebels said they would probably seek foreign military help, a sensitive topic for Western countries uncomfortably aware that Iraq suffered years of bloodletting and al Qaeda violence after a 2003 U.S.-led invasion toppled Saddam Hussein.
"We are probably going to call for foreign help, probably air strikes at strategic locations that will put the nail in his (Gaddafi's) coffin," Mustafa Gheriani, a spokesman for the rebel February 17th Coalition, told Reuters.
"They tried to take Brega this morning, but they failed. It is back in the hands of the revolutionaries. He (Gaddafi) is trying to create all kinds of psychological warfare to keep these cities on edge," he said.
There are fears that the uprising, the bloodiest yet against long-serving rulers in the Middle East, is causing a major humanitarian crisis, especially on the Tunisian border where thousands of foreign workers are trying to flee to safety.