Swedish Foreign Minister Carl Bildt said the EU is still looking for Libyan interlocutors.

• Sweden no longer recognises Libyan embassy

UQAYLA, March 12, 2011 (AFP) - Libyan rebels beat a further retreat on Saturday under air strikes and shellfire from Moamer Kadhafi's forces, even as an Arab League decision to back a no-fly zone boosted their uprising.

Having abandoned an operation to recapture the oil town of Ras Lanuf, the outgunned anti-regime fighters struggled to set up a new defensive line 30 kilometres (about 20 miles) further east along a coastal road towards Brega.

Brega is the last main town before Ajdabiya, gateway to eastern Libya on the roads to the main rebel cities of Benghazi and Tobruk.

Diplomats in Cairo said the Arab League in crisis talks came out in support of plans to impose a no-fly zone over Libya and decided to make contact with the rebels' provisional national council.

Arab League foreign ministers "have agreed to invite the (UN) Security Council to assume its responsibilities and impose an air-exclusion zone to protect the people of Libya," one diplomat said on condition of anonymity.

The decision was adopted by nine of the 11 foreign ministers attending the meeting at the organisation's headquarters in the Egyptian capital from which Libyan envoys were excluded, with Algeria and Syria voting against, he said.

"The ministers also decided to open channels to contact the transitional national council in Libya in order to help the Libyan people," the diplomat added.

The rebels' 30-member council had urged the Arab League to recognise it as representing Libya instead of Kadhafi's regime and to back a no-fly zone to curb attacks on its fighters, in a letter to the League's chief, Amr Mussa.

Mussa himself called for a no-fly zone as proposed by Western countries and said he wanted the pan-Arab organisation to play a role in imposing it, in an interview published on Saturday.

"The United Nations, the Arab League, the African Union, the Europeans -- everyone should participate," Mussa told German weekly Der Spiegel.

"I am talking about a humanitarian action. It consists, with a no-fly zone, of supporting the Libyan people in their fight for freedom against a regime that is more and more disdainful."

EU leaders agreed at an emergency summit on Friday to talk to Kadhafi's opponents and protect Libyan civilians "by all necessary means" while stopping short of an outright military threat.

They demanded Kadhafi "relinquish power immediately" and deemed the opposition council based in Benghazi "a political interlocutor."

However, there was no mention of calls from Britain and France for a no-fly zone, and strident demands from French President Nicolas Sarkozy for "targeted action" against Kadhafi went unheeded.

Seif al-Islam, Kadhafi's son, said in Italian newspaper interviews published on Saturday that he was confident government troops would defeat the rebels, adding they had already retaken control over "90 percent of the country."

He swore there would be no negotiations, branding the rebels terrorists and saying there would be a "war to the end."

A UN mission was due in Libya on Saturday to evaluate the country's humanitarian needs, after Deputy Foreign Minister Khaled Kaaim said the team would tour hospitals to check on food and medicine supplies.

Kaaim made no mention of the arrival of former Jordanian foreign minister Abdul Ilah Khatib, dispatched by United Nations chief Ban Ki-moon to raise international concerns about Kadhafi's deadly crackdown on protests.

Khatib, due in Tripoli early next week, would put across to the regime "in no uncertain terms the concerns of the United Nations and the international community," Ban told reporters in New York.

The envoy would have a political role in trying to end the conflict but also to try to open up humanitarian access to the Libyan population, Ban said.

US President Barack Obama said Friday the world was "tightening the noose" on Kadhafi, but acknowledged he was "concerned" the Libyan strongman could defeat the rebels.

Obama said he would appoint an envoy to the Libyan opposition as part of a bid to "change the balance" of the military situation in Libya, and warned the world had an obligation to avoid a massacre.

The president added he was gauging support with regional powers for a no-fly zone, which Washington has so far resisted.

Obama's defence secretary Robert Gates played up the US reluctance again on Saturday, saying: "This is not a question of whether we or our allies can do this.

"The question is whether it's a wise thing to do and that's the discussion that's going on at a political level."

The European Union has also stressed the need for "a clear legal basis and support from the region," reflecting divisions over the political fallout from a foreign military intervention.

The EU called for an urgent summit on the crisis along with the Arab League and the African Union, which on Friday rejected military intervention but tasked five presidents of member states to mediate.

And Swedish Foreign Minister Carl Bildt said Saturday the EU was still looking for Libyan interlocutors, even within the ruling regime, after the bloc refused to talk to Kadhafi and France recognised the opposition council.

"No one is excluded apart from Kadhafi," he said on the margins of an informal EU meeting in Hungary. "We need to have contacts with all different sectors of Libyan society."

"The Benghazi council is an essential partner ... There can be other interlocutors," French Foreign Minister Alain Juppe added.

In other developments in the Middle East, three protesters including a 12-year-old schoolboy were killed in fresh bloodshed in Yemen on Saturday, as clashes between police and anti-regime demonstrators raged across the country.

And police in Algeria launched a massive operation to head off marchers calling for an immediate end to President Abdelaziz Bouteflika's regime.