Libya denies Russian report Gaddafi seeking way out

TRIPOLI (Reuters) - Muammar Gaddafi is sounding out the possibility of handing over power, a Russian newspaper reported on Tuesday, but the Libyan government denied it was in talks about the veteran leader stepping down.

Five months into a conflict that has embroiled NATO and become the bloodiest of the "Arab Spring" uprisings, there has been a flurry of reports about talks on Gaddafi ending his four decades in power in exchange for security guarantees.

Russia's respected Kommersant newspaper based its story on a high-level source in Moscow. The report was denied in Tripoli, and Italy said it believed talk of a deal was a ruse by Gaddafi's administration to sow confusion.

"Information about negotiations about Gaddafi stepping down or seeking a safe refuge inside or outside the country is simply untrue," Libyan government spokesman Moussa Ibrahim told Reuters.

"Gaddafi is not negotiable, this is our position of principle, and the future of Libya will be decided by Libyans. Gaddafi is an historical symbol, and Libyans will die to defend him," said Ibrahim.

The United States reiterated its position that Gaddafi should step down. "We support whatever's going to get us to a place where Gaddafi knows it's time for him to go," State Department spokeswoman Victoria Nuland said.

Fighting between government forces and rebels continued, with rebels taking some of the heaviest shelling in recent weeks.

A Reuters reporter in Misrata, 200 km (130 miles) east of Tripoli, said rebel positions in the Dafniya district on the city's western outskirts came under heavy artillery fire on Tuesday.

The bodies of rebel fighters were taken to Misrata's al-Hekma hospital and a hospital source said the death toll from the shelling had risen to 11 with 42 fighters wounded.

Many of them were in a critical condition, and some would need to have limbs amputated, staff at the hospital said.

On Monday, Gaddafi's forces ambushed rebels south of Misrata, killing six and injuring 22, said Abdelsalam, a rebel spokesman in Misrata.

The rebels said again they would not compromise on letting Gaddafi remain in the country as a free man.

"Any solution that doesn't include Gaddafi stepping down and facing trial or leaving Libya is unacceptable," Abdelsalam said.

"SEEKING GUARANTEES"

Some analysts say Gaddafi is starting to contemplate an exit as shortages of cash and fuel, the NATO bombing campaign and rebel military pressure shorten the odds on him being able to hold on to power.

But Western diplomats caution it is in Gaddafi's interest to send out conflicting signals about possible deals, in the hope of sowing confusion among the rebels and the fragile Western alliance trying to push him out.

Kommersant newspaper reported Western powers, including France, were receptive to a deal with Gaddafi if he agreed to step down.

"The colonel (Gaddafi) is sending signals that he is prepared to relinquish power in exchange for security guarantees," the newspaper quoted what it called a high-level source in the Russian leadership as saying.

The report came a day after Russia hosted South African President Jacob Zuma -- who has tried to broker a peace deal for Libya -- and NATO Secretary General Anders Fogh Rasmussen for talks which focused on Libya.

After his return from Russia, Zuma's office issued a statement saying he had asked NATO to persuade the rebel National Transitional Council to come to the negotiating table.

Turkey is hopeful that Western and Arab governments could help put in place the framework of a solution to the crisis by next month, its foreign minister said.

"We hope for significant progress toward a political solution before the month of Ramadan," Ahmet Davutoglu told a news conference. The Muslim fasting month of Ramadan is expected to start in early August.

On Monday, the Libyan government had said it held talks in Italy, Norway and Egypt with senior figures in the opposition about finding a peaceful way out of the conflict.

But the Italian government denied any talks had taken place on its soil and expressed skepticism that Gaddafi's administration was sincere about talks.

"The aim of Tripoli's people, Tripoli's regime, is to drive a wedge within the coalition," said Italian Foreign Ministry spokesman Maurizio Massari.

Speaking to Reuters on Tuesday, Libyan government spokesman Ibrahim said the Italian government was mistaken but could not reveal the identity of the Italian government member who attended the talks "for diplomatic reasons."

A Libyan official based in Cairo said Libya's Health and Environment Minister Mohamed Mahmoud al-Hijazi had set off to Vienna where he was to have talks with members of the Libyan opposition on behalf of Gaddafi's government.

There was no immediate confirmation of the trip.

NATO launched its bombing campaign in March after the United Nations Security Council authorized the use of all necessary means to protect civilians who, inspired by revolutions in neighboring Tunisia and Egypt, rose up against Gaddafi.

Gaddafi says the rebels are armed criminals and al Qaeda militants. He has called the NATO operation an act of colonial aggression aimed at stealing Libyan oil.

Rebels control the eastern third of Libya, as well as pockets in the West, and NATO says its strikes are gradually eroding Gaddafi's hold on power. But the rebels have failed to make a breakthrough and advance on Tripoli.

Aid agencies have warned of shortages of food and medicines in rebel areas.

United Nations workers who visited the Western Mountains region, southwest of Tripoli, said farmers had been forced to sell or eat their livestock, leaving them without a livelihood.

(Additional reporting by Tarek Amara in Tunis; Ali Shuaib in Tripoli; Hamuda Hassan in Misrata; Marius Bosch in Johannesburg; Steve Gutterman in Moscow; Stephanie Nebehay in Geneva; Deepa Babington in Rome; Andrew Quinn in Washington and Joseph Nasr in Berlin; writing by Christian Lowe and David Dolan; editing by Janet Lawrence)