Libyan forces loyal to Muammar al-Qaddafi , closed in on rebels in the western city of Zawiyah on Wednesday, surrounding them with tanks and snipers in the main square, a resident and a rebel fighter said.
"We can see the tanks. The tanks are everywhere," a rebel fighter told Reuters by phone from inside Zawiyah, the closest rebel city to the capital Tripoli.
"They have surrounded the square with snipers and tanks. The situation is not so good. It's very scary. There are a lot of snipers," said a resident.
With the international community still hesitant about how to respond to the crisis in Libya, a counter-offensive by Gaddafi loyalists has halted a rebel advance in the east and left others stranded in the western cities of Zawiyah and Misrata.
The rebel fighter in Zawiyah, named Ibrahim, said forces loyal to Gaddafi were in control of the main road and the suburbs. Rebel forces still controlled the square and the enemy was about 1,500 metres (yards) away, he said.
Ibrahim said there were army snipers on top of most of the buildings, shooting whomever dared to leave their homes.
"There are many dead people and they can't even bury them. Zawiyah is deserted. There's nobody on the streets. No animals, not even birds in the sky," he said.
A government spokesman said troops were mostly in control of Zawiyah, but there was still a small group of fighters. "Maybe 30-40 people, hiding in the streets and in the cemetery. They are desperate," he said in Tripoli.
Foreign reporters have been prevented from entering Zawiyah, 50 km (30 miles) west of Tripoli, and other cities near the capital without an official escort.
Rising casualties and threats of hunger and a refugee crisis have increased pressure on foreign governments to act, but many were fearful of moving from sanctions alone to military action. President Barack Obama has faced criticism for being cautious.
"We want to see the international community support it (a no-fly zone)," Clinton told Sky News. "I think it's very important that this not be a U.S.-led effort."
British Prime Minister David Cameron, who talked with President Barack Obama about a no-fly zone by telephone, told the BBC planning was vital in case Gaddafi refused to step down in response to the popular uprising that erupted mid-February.
"I think now we have got to prepare for what we might have to do if he goes on brutalising his own people," he said.
In the telephone call, the two leaders "agreed 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".
Britain and France are seeking a U.N. resolution to authorise such a zone to ground Gaddafi's aircraft and prevent him moving troops by air. Russia and China, which have veto power in the U.N. Security Council, are cool towards the idea, which could require bombing Libyan air defences.
Hafiz Ghoga, spokesman for the rebel National Libyan Council, said in the rebel base of Benghazi in eastern Libya:
"We will complete our victory when we are afforded a no-fly zone. If there was also action to stop him (Gaddafi) from recruiting mercenaries, his end would come within hours."
In the east, much of which is under rebel control, warplanes bombed rebel positions around the oil port of Ras Lanuf where the front line is shifting, with rebels in 4x4 trucks mounted with weapons engaging the army in strike and counter-strike.
Revolutionary euphoria seemed to have dimmed. "People are dying out there. Gaddafi's forces have rockets and tanks," Abdel Salem Mohamed, 21, told Reuters near Ras Lanuf on Wednesday. "You see this? This is no good," he said of his light machinegun.
Air strikes hit rebels behind the stretch of no man's land desert between Ras Lanuf and Bin Jawad, 550 km (340 miles) east of Tripoli. The towns are about 60 km (40 miles) apart on the strategic coast road along the Mediterranean Sea.
Pro-Gaddafi troops who had besieged the rebel-held city of Misrata left on Tuesday, driving east towards Sirte with other forces coming from Tripoli, a resident said. There had already been reports Sirte had been reinforced from the south.
SET ON SIRTE
Sirte, hometown and a stronghold of Gaddafi, lies on the road to the emerging front that divides the country along ancient regional lines, with oil facilities in the middle, and has become a symbolic prize targeted by the rebels.
Gaddafi has said rebels were drug-addled youths and al Qaeda-backed terrorists, and said he would die in Libya rather than surrender. One of his sons said if Gaddafi bowed to pressure and quit, Libya would descend into civil war.
Gaddafi and his entourage made a dramatic visit to a Tripoli hotel where foreign journalists were staying late on Tuesday and gave interviews to French and Turkish television.
Early on Wednesday, Libyan television broadcast a speech, recorded a day earlier, by Gaddafi to tribal leaders in Tripoli, his fourth televised address since the uprising began.
Returning to familiar themes, the Libyan leader said the rebels wanted to pave the way for a new colonial era that would allow Britain, France and the United States to divide up the country and control its oil wealth.
Representatives of the Libyan opposition met EU foreign policy chief Catherine Ashton in Strasbourg and planned to speak at the European Parliament on Wednesday.
Mahmoud Jebril, head of the crisis committee of the National Libyan Council, said the EU should recognise the council as the sole legitimate representative of the Libyan people.
EU states agreed to add the $70 billion Libyan Investment Authority to a sanctions list on Tuesday. The embargo already covers 26 Libyans including Gaddafi and his family.