TRIPOLI Muammar Gaddafi, facing calls to step down after a bloody crackdown threatening his 41-year rule, blamed al Qaeda cells on Wednesday for creating turmoil and said there was a conspiracy to control Libya and its oil.
Gaddafi, who said no more than 150 people were killed in the unrest caused by "terrorists," told a loyal audience in an address shown on state television that if the United States or foreign powers entered Libya they would face a bloody war.
The Libyan leader said he was willing to discuss constitutional and legal change without arms or chaos and was ready to talk with al Qaeda if they had demands.
"There is a conspiracy to control the Libyan oil and to control the Libyan land, to colonize Libya once again," he said.
"This is impossible, impossible. We will fight until the last man and last woman to defend Libya from east to west, north to south," Gaddafi told his supporters who punctuated the address with cheers of support and declarations of loyalty.
"You will remain great!" chanted the crowd to Gaddafi, who was full of confidence and vigor but apparently in denial about swathes of Libya occupied by anti-Gaddafi rebels.
"We will enter a bloody war and thousands and thousands of Libyans will die if the United States enters or NATO enters" Gaddafi said.
On the sequence of events that started the unrest, Gaddafi, who in a previous speech said protesters against his rule were brain-washed by Osama bin Laden and had their milk and Nescafe spiked with hallucinogenic drugs, said: "How did that all begin? Small, sleeper al Qaeda cells."
Wearing long, white robes, a brown head-dress and gesticulating, Gaddafi said: "Al Qaeda's cells attacked security forces and took over their weapons ... After Bayda, the Qaeda cells moved to Benghazi and Derna."
Gaddafi, 68, said there were no protests against his rule in Libya and that "underground groups" were whipping people up and reports by the media to the contrary were wrong. There were no political prisoners in Libya, he said.
"FINGERS IN THE EYES"
The international community should set up a fact-finding committee to find out just how many people had been killed in the Libyan unrest and accusations against Libya, he said.
"I dare you to find that peaceful protesters were killed. in America, France, and everywhere, if people attacked military storage depots and tried to steal weapons, they will shoot them," Gaddafi said.
The world did not understand the Libyan system that puts power in the hands of the people, Gaddafi said.
"Muammar Gaddafi is not a president to resign, he does not even have a parliament to dissolve," he said at the celebration to mark the declaration of Libya as a Jamahiriya in 1977.
"We put our fingers in the eyes of those who doubt that Libya is ruled by anyone other than its people," he said, referring to his system of "direct democracy" which he outlines in his famous Green Book.
"The Libyan system is a system of the people and no one can go against the authority of the people ... The people are free to chose the authority they see fit," Gaddafi said.
"I am not in a seat to resign from it, by asking me to resign, they are doubting the accomplishment of the people. Libya is ruled by the people," Gaddafi said.
At one point during the address, a woman in black robes and a green scarf seized a microphone and shouted: "How can you go? You will not go and you will never leave! You are all that is good! You are a sword that doesn't bend."
Gaddafi told the excited supporters: "Calm down youths."
On media coverage of the uprising, Gaddafi said:
"News reached the world from stations and agencies that did not have correspondents in Libya, unfortunately ... Libyans do not like foreign correspondents," he said.
The images came from inside a hall with long, red curtains and Gaddafi moved through the hall before sitting on a podium in front of the clapping gathering. He joined them in singing the national anthem.
(Reporting by Dina Zayed, Shaimaa Fayed, Tom Perry, Sherine Al Madeny,: Writing by Edmund Blair and Peter Millership in Cairo)