TRIPOLI Muammar Gaddafi, orchestrating a populist response to rebels threatening his rule, blamed al Qaeda on Wednesday for creating turmoil and told applauding supporters 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 an audience of loyalists in a speech shown live on state television that if Washington or other foreign powers entered Libya they would face a bloody war.
Apparently confident and relaxed, but in denial about the occupation of swathes of Libya by rebels seeking an end to his long rule, Gaddafi said he was willing to discuss constitutional change without arms or chaos and would even talk with al Qaeda.
"I am ready to debate any one of them, one of their 'emirs', but they do not have demands at all," he said.
"There is a conspiracy to control the Libyan oil and to control the Libyan land, to colonize Libya once again."
"THOUSANDS WILL DIE"
Speaking to supporters who punctuated the address with cheers of support and declarations of loyalty, he said Libyans would fight to the "last man and last woman" against foreigners.
"We will enter a bloody war and thousands and thousands of Libyans will die if the United States enters or NATO enters," Gaddafi said, laughing at points during his long address.
"Do they want us to become slaves once again like we were slaves to the Italians ... We will never accept it," he 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 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, he said.
Gaddafi, who once said democracy was for donkeys, told the meeting that the world did not understand the Libyan system that puts power in the hands of the people,
"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.
Admirers say the system of town hall meetings, in which political parties are banned, guarantees ordinary people a direct say in ruling themselves and ensures political stability.
Critics say the country's Jamahiriyah or "state of the masses," the only government most Libyans have known, is a fig leaf for authoritarian rule and has kept the country poor.
"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."
At one point during the appearance, 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."
(Reporting by Dina Zayed, Shaimaa Fayed, Tom Perry, Sherine Al Madeny,: Writing by Edmund Blair and Peter Millership in Cairo)