By Peter Graff, Ulf Laessing
REUTERS
TRIPOLI: Moammar Gadhafi taunted his Libyan enemies and their Western backers Thursday as Libya’s new leaders announced that it would govern the country from Tripoli.
Rebel forces battled pockets of loyalists across Tripoli in an ever more urgent quest to find and silence the fugitive strongman.

Rumors of Gadhafi or his sons being cornered, even sighted, swirled among excitable rebel fighters engaged in heavy machine-gun and rocket exchanges. But two days after his compound was overrun, hopes of a swift end to six months of war were still being frustrated by fierce rear-guard actions.

Western powers demanded Gadhafi’s surrender and worked to release frozen Libyan state funds, hoping to ease hardships and start reconstruction in the oil-rich state. But with loyalists holding out in the capital, in Gadhafi’s coastal home city and deep in the inland desert, violence could go on for some time, testing the ability of the government in waiting to keep order.

“The tribes … must march on Tripoli,” Gadhafi said in an audio message broadcast on a sympathetic television channel. “Do not leave Tripoli to those rats, kill them, defeat them quickly.”
“The enemy is delusional, NATO is retreating,” he shouted, sounding firmer and clearer than in a similar speech released Wednesday. Though his enemies believe Gadhafi, 69, is still in the capital, they fear he could flee by long-prepared escape routes, using tunnels and bunkers, to rally an insurgency.

Diehards numbering perhaps in the hundreds were keeping at bay squads of irregular, anti-Gadhafi fighters who had swept into the capital Sunday and who were now rushing from one site to another, firing assault rifles, machine guns and anti-aircraft cannon bolted to the backs of pick-up trucks.
In a southern district close to the notorious prison of Abu Salim, the rebel forces launched a concerted assault, sweeping from house to house.

While random gunfire broke out periodically across the city, some of its 2 million residents ventured out to stock up on supplies. Aid agencies sounded an alarm about food, water and also medical supplies, especially for hundreds of wounded. New leadership said it had found huge stockpiles in Tripoli which would meet all demands for food, drugs and fuel.
In another sign of optimism, the official taking charge of financial and energy affairs told Reuters Libya hoped to resume exporting crude oil next month and that damage to oil facilities during the fighting had been less than feared.

“The NOC initial estimate is that we can have about 500,000 to 600,000 barrels within two to three weeks,” Ali Tarhouni said. “And then we ramp this up to the normal, which is about 1.6 [million]. My expectation is that this will be done within a year or so.
“The state of the oil fields are a lot better than expected … Most of the fields are more than 90 percent fine.”
It was the first time an official from the rebel National Transitional Council was seen in the capital taking up the reins of government.

Nonetheless, in order to begin installing an administration in a nation run by an eccentric personality cult for 42 years, to offer jobs to young men now bearing arms and to heal ethnic, tribal and other divisions that have been exacerbated by civil war, Libya’s new masters are anxious for hard cash quickly.

“We need urgent help,” Mahmoud Jibril, the head of the government-in-waiting, told Italy’s premier Silvio Berlusconi in Milan as Western leaders persuaded others at the U.N. to unblock $1.5 billion of Libyan foreign assets. Some governments, notably in Africa where there was some sympathy for Gadhafi’s view of his Western enemies as colonialist aggressors, had been reluctant to agree so far. After a meeting of officials in Istanbul, the Contact Group of allies against Gadhafi called on Libyans to avoid revenge.

“The participants attached utmost importance to the realization of national reconciliation in Libya,” it said. “They agreed that such a process should be based on principles of inclusiveness, avoidance of retribution and vengeance.”

The group also urged the U.N. Security Council to pass a resolution freeing up cash quickly. Jibril said the uprising could fall apart if funds were not forthcoming quickly. “The biggest destabilizing element would be the failure … to deliver the necessary services and pay the salaries of the people who have not been paid for months,” he added.
Gadhafi’s opponents fear that he may rally an insurgency, as did Saddam Hussein in Iraq, should he remain at large and, perhaps, in control of funds salted away for such a purpose.

Western powers, mindful of the bloodshed in Iraq, have made clear they do not want to engage their troops in Libya. But a U.S. State Department spokeswoman said Washington would look favorably on any Libyan request for U.N. police assistance – something some say might aid a transition to democracy.

Rebel leaders, offering a $1.6 million reward, say the war will be over only when Gadhafi is found, “dead or alive.”
The ex-international high representative in Bosnia, Paddy Ashdown, told Reuters there was a need for speed if Libya’s new rulers were to avoid a lingering threat from their predecessor, unlike what transpired in the former Yugoslavia and Iraq.

“The best time to capture these defeated leaders is immediately after the conflict finishes,” Ashdown said. “The longer it takes the more chance they have of being spirited away to a place which is much more difficult to find.”
The United States and NATO are also deeply concerned about possible looting and resale of weapons from Libyan arsenals as Moammar Gadhafi’s rule crumbles, though the U.S. State Department said it believes Libya’s stocks of concentrated uranium and mustard agent are secure.

With fighting raging in Tripoli, there was evidence of the kind of bitter bloodletting in recent days that the rebel leaders are anxious to stop in the interests of uniting Libyans, including former Gadhafi supporters, in a democracy.
A Reuters correspondent counted 30 bodies, apparently of troops and gunmen who had fought for Gadhafi, at a site in central Tripoli. At least two had their hands bound. One was strapped to a hospital trolley with a drip still in his arm.

All the bodies had been riddled with bullets.
Elsewhere, a British medical worker said she had counted 17 bodies who she believed were of prisoners executed by Gadhafi’s forces. One wounded man said he had survived the incident, when, he said, prison guards had sprayed inmates with gunfire Tuesday as the rebel forces entered Gadhafi’s compound.