Nato is not looking to intervene in Libya but its military forces are ready to respond to any developments at short notice, its secretary general said today.
Anders Fogh Rasmussen said any action would require a clear United Nations mandate and widespread international support.
"Nato is not looking to intervene in Libya, but we have asked our military to conduct prudent planning for all eventualities," he told Sky News.
"There are a lot of sensitivities in the region as regards with what might be considered foreign military interference…This is why any action should be based on a very broad international support including support from the region."
As fighting continued in Libya, embattled leader Muammar Gadafy warned that his people would take up arms against Western powers if they seek to enforce a no-fly zone in the country's airspace.
Britain and the United States have discussed an internationally backed no-fly zone as a contingency plan in case Col Gadafy refuses to step down in response to ongoing uprising in the north African state.
"If they take such a decision it will be useful for Libya, because the Libyan people will see the truth, that what they want is to take control of Libya and to steal their oil," Col Gadafy said in an interview broadcast by Turkey's state-run TRT news channel. "Then the Libyan people will take up arms against them," he added.
Forces loyal to Col Gadafy claime to have recaptured Zawiyah today after a fierce attack on the closest rebel-held city to the capital Tripoli.
Libyan state television showed footage of Gadafy supporters waving flags in what it said was a celebratory march in Zawiyah and a rebel fighter told Reuters pro-Gadafy forces had driven rebels from their stronghold in the central square.
However, the rebel group later said they had launched a counter-offensive and had regained control of the city's main square.
A local doctor confirmed the report and said the death toll in the day's fighting was at least 40 and probably many more.
Rebels in the east faced a fresh barrage of artillery fire on their desert frontline outside the oil port of Ras Lanuf.
Dr Gebril Hewadi of the Benghazi medical management committee said that least 400 people had been killed in eastern Libya since clashes began there on February 17th, with many corpses yet to be recovered from bombing sites.
The eastern rebels renewed an appeal for outside powers to impose a no-fly zone to at least shield them from air attacks.
Earlier, US president Barack Obama and British prime minister David Cameron agreed in a telephone call "to press forward with planning, including at NATO, on the full spectrum of possible responses, including surveillance, humanitarian assistance, enforcement of the arms embargo, and a no-fly zone".
US secretary of state Hillary Clinton has made it clear that Washington believes any decision to impose a no-fly zone over the oil-producing desert state is a matter for the United Nations and should not be a US-led initiative.
Col Gadafy repeated earlier claims that the revolt was inspired by foreign al Qaeda militants who have paid young men and freed prisoners to fight with them.
He said Western governments and media had been fooled by al Qaeda propaganda into believing that government forces had unleashed violence on Libyan people.
"I'd have to be mad to shoot at peaceful demonstrators. I'd never have done that. I'd never have allowed anyone to be shot," he said in an interview with France's LCI television.
Human rights activists estimate more than 1,000 people have been killed since the uprising began in mid-February.
Col Gadafy also complained that the UN Security Council was bypassing its own processes to act hastily against Libya.
Meanwhile, Shokri Ghanem, chairman of Libya's National Oil Corporation, said the state's oil production had fallen from 1.6 million barrells per day to just 500,000.
He said some other OPEC member countries had said they would make up for this shortfall and that he believed they would.
Agencies