* Gaddafi son Saadi says in talks for peace
* Other son Saif al-Islam vows 'war of attrition'
* Loyalists in Sirte holding out after ultimatum
* New rulers want UN help with police, but no peacekeepers
(Adds Saif al-Islam on fighters in Sirte; adds details)
By Samia Nakhoul and Maria Golovnina
TRIPOLI/TAWARGA, Libya, Aug 31 Muammar
Gaddafi's sons clashed on the airwaves on Wednesday, with one
offering peace and another promising a 'war of attrition' as a
final battle for control of Libya's coast loomed.
The conflicting messages were the latest evidence that the
fallen leader was losing his grip on what remains of his
entourage after a six-month uprising left his 42-year rule of
the North African nation in tatters.
NATO warplanes struck at loyalist troops dug in around his
beseiged hometown of Sirte -- his last stronghold along the
heavily populated Mediterranean seaboard-- and refugees streamed
out fearing a bloody showdown.
A week after they overran the capital, forcing Gaddafi into
hiding, irregular troops of the new ruling council have paused
in a drive to take Sirte and Gaddafi strongholds in the desert,
giving Sirte's defenders until Saturday to surrender. But
frontline clashes continued, as did NATO air strikes.
"We were talking about negotiations based on ending
bloodshed," Gaddafi's son Saadi said on al-Arabiya television,
saying he had been given his father's blessing to negotiate with
the ruling National Transitional Council.
The head of Tripoli's military council, Abdul Hakim
Belhadj, told Reuters he had spoken to Saadi by telephone and
had promised him decent treatment if he surrenders.
"We want to spare bloodletting, therefore negotiation and
surrender is preferable," Belhadj said. "If this does not happen
there is no other way except a military solution."
In a sign of turbulence within the Gaddafi clan, the former
leader's better-known son Saif al-Islam hurled defiance at the
NATO-backed forces and said the fight would continue.
"We must wage a campaign of attrition day and night until
these lands are cleansed from these gangs and traitors," he said
in a statement broadcast on the Syrian-owned Arrai satellite TV
channel. "We assure people that we are standing fast and the
commander is in good condition."
He said there were 20,000 loyalist soldiers ready to defend
Sirte in the case of an attack.
Despite shortages and disruptions, people in Tripoli,
Misrata, Benghazi and other cities took to the streets to
celebrate the Eid al-Fitr holiday, a high point of the Muslim
calendar marking the end of the Ramadan fast. For most Libyans,
it was the first Eid they could remember without Gaddafi.
Anxious to aid -- and steer -- the new rulers of the
country, and to consolidate their own victory over a man who has
baffled and infuriated them for decades, Western governments
will hold a "Friends of Libya" meeting in Paris on Thursday.
The date, Sept. 1, is laden with symbolism as the
anniversary of Gaddafi's seizure of power in 1969.
Until the 69-year-old fugitive is hunted down, dead or
alive, the transitional council's leaders say they will not
count their country's "liberation" as complete.
But though there is much talk of closing in on Gaddafi and
his sons, of tempting loyalists to betray them and of tracking
their communications, it is unclear where the key figures are.
Hisham Buhagiar, a senior NTC official who is coordinating
the hunt, told Reuters he believed Gaddafi was either in the
Bani Walid area, southeast of Tripoli, or in Sirte, 450 km (265
miles) east of the capital.
The arrest in Tripoli on Wednesday of Gaddafi's foreign
minister, Abdelati Obeidi, as witnessed by a Reuters journalist
may provide more clues.
"We trace a lot of people who are not in the first inner
circle with him, but the second or third circle. We're talking
to them," said Buhagiar. "They want to strike deals. Everyone
who helps us is on the white list."
Britain's ITV News reported that British special forces
were helping in the hunt for Gaddafi. They believed he is still
in Libya and has been denied entry to Algeria, where his wife
and three of his children have taken refuge.
Troopers of the elite SAS, some working from ships off the
coast, were using round-the-clock aerial surveillance to try to
track him and his close supporters.
"When a target is identified, a Helicopter Assault Force
moves in to capture the individual who will then be interrogated
for further intelligence about Colonel Gaddafi's movements, the
ITV report said.
While the threat of an Iraq-style insurgency led by those
loyal to the old guard is clearly a worry to the new leaders,
their international backers are also concerned that the NTC can
overcome regional, ethnic and tribal differences across Libya.
There has been praise from abroad for its pledges of
equality, fairness and willingness to bury past grievances,
though there is also disquiet at evidence of harassment, and
worse, by victorious fighters of some groups, notably black
Libyans and African migrants, widely seen as allies of Gaddafi.
At Tawarga, where anti-Gaddafi forces are dug in and
readying an assault on Sirte to the east, most of the residents
were black African rather than Arab in origin and have recently
fled -- apparently in fear of reprisals by fighters from the
city of Misrata who see Tawarga as a pro-Gaddafi town.
Also fleeing their homes were hundreds of people from towns
around Sirte, who streamed through a frontline checkpoint set up
by NTC forces on the coastal highway at Tawarga.
"I need to take my family where it is peaceful," said one
man named Mohammed, as laden vehicles flying white flags were
checked for weapons. "Here there will be a big fight."
Ali Faraj, a fighter, said he doubted people in Sirte would
willingly join the revolt: "There will be a big fight for Sirte.
It's a dangerous city. It's unlikely to rise up," he said.
"A lot of people there support Gaddafi. It's too close to
Gaddafi and his family. It is still controlled by them."
There is no independent confirmation of conditions in Sirte,
which was developed into a prosperous city of 100,000 during the
42 years Gaddafi ruled Libya. NTC officials say power and water
are largely cut off and supplies are low.
In Tripoli after dawn, worshippers packed Martyrs' Square,
which was named Green Square in the Gaddafi era, chanting
"Allahu Akbar (God is greatest), Libya is free".
Fighters on rooftops guarded against any attack by loyalists
and sniffer dogs checked cars. Even the interim interior
minister, Ahmed Darat, was searched.
"This is the most beautiful Eid and most beautiful day in 42
years," said Hatem Gureish, 31, a merchant from Tripoli.
Fatima Mustafa, 28, a pregnant woman wearing a black chador,
said: "This is a day of freedom. I'm glad I haven't given birth
yet so my daughter can be born into a free Libya."
Libyans who revolted against Gaddafi in February needed NATO
air power to help them win, but, given their country's unhappy
colonial history, they remain wary of foreign meddling.
Their interim leaders, trying to heal a nation scarred by
Gaddafi's cruelly eccentric ways, may want United Nations help
in setting up a new police force, but see no role for
international peacekeepers or observers, a U.N. official said.
The NTC, keen to assert its grip and relieve hardship after
six months of war, won a $1.55 billion cash injection when
Britain's air force flew in new dinar banknotes to Benghazi.
They had been printed in Britain but then held there by U.N.
sanctions imposed on Gaddafi's government.
France, which with Britain took a lead role in backing the
revolt and will host Thursday's conference, has asked the
committee to unfreeze some $2 billion of Libyan assets in
France, a French