Forces opposed to Moamer Kadhafi took control of several western Libyan towns, an official said on Sunday as the strongman played down rebel gains after world leaders called on him to quit.
Protest leaders established a transitional "national council" in several eastern and western cities seized from the Kadhafi regime and called on the army to help them take the capital Tripoli.
The United States said it was prepared to offer "any kind of assistance" to Libyans seeking to overthrow Kadhafi as his opponents piece together a transitional body comprising representatives from the liberated cities.
The unrest in the oil-rich north African state has set off a "humanitarian emergency", the UN refugee agency UNHCR said, as almost 100,000 migrant workers fled Libya in a mass exodus of foreigners.
US Secretary of State Hillary Clinton echoed the calls of world leaders, including President Barack Obama, for him to quit.
"We are just at the beginning of what will follow Kadhafi," she said.
"First we have to see the end of his regime and with no further bloodshed," she said, noting Washington is eager for his ouster "as soon as possible."
"We want him to leave."
Speaking ahead of a UN Human Rights Council meeting in Geneva on Monday, Clinton said she would meet many of her counterparts from Europe and beyond to craft responses on both the humanitarian and political fronts as Libyans try to "organise themselves post-Kadhafi."
The UN Security Council imposed a travel and assets ban on Kadhafi's regime and ordered an investigation into possible crimes against humanity after at least 1,000 people were killed in a crackdown by Kadhafi's security apparatus.
London said it had frozen Kadhafi family assets in Britain, amid newspaper reports that these amount to around 20 billion pounds (32.2 billion dollars, 23.4 billion euros) in liquid assets, mostly in London.
Australia is investigating claims that Kadhafi's family has stashed millions of dollars in assets down under, Foreign Minister Kevin Rudd said Monday. Canberra has launched a forensic probe to track down any assets the crumbling regime may have secretly built up in Australia.
A community organiser, Abdel Hafiz Ghoqa, told reporters in Benghazi on Sunday that a transitional "national council" had been set up in cities seized from the regime.
"The creation of a national council has been announced in all freed cities of Libya," he said.
The council is the "face of Libya in the transitional period," he said, adding that consultations were under way on the new body's composition and duties.
"The people of Libya will liberate their cities," Ghoqa said. "We are counting on the army to liberate Tripoli."
On Saturday, former justice minister Mustafa Abdel Jalil, who quit Kadhafi's regime on Monday, announced a transitional government would be formed to lead the country for a three-month period before an election.
In neighbouring Egypt, visiting US senators John McCain and Joe Lieberman urged Washington to recognise a transitional government in Libya and provide it with weapons and humanitarian assistance to oust the Libyan strongman.
Kadhafi on Sunday dismissed the UN sanctions as invalid and claimed calm had returned to Libya as the territories held by the opposition were "surrounded."
In his telephone statement to Serbian television, the Libyan leader insisted the situation in his North African country was calm.
"There are no incidents at the moment and Libya is completely quiet. There is nothing unusual. There is no unrest," he claimed, adding that only a small number of people had been killed on both sides.
Of the territory held by the opposition, Kadhafi said: "There is a small group (of opponents) that is surrounded, but we will sort that out."
But his crumbling regime now controls only some western areas around the capital and a few long-time bastions in the arid south, reporters and witnesses say.
An AFP reporter arriving in Nalut, a town of 66,000 people, 235 kilometres (145 miles) west of Tripoli, found loyalist Kadhafi forces had entirely disappeared.
"The city has been liberated since February 19. It has been run by a revolutionary committee named by the town's communities," Shaban Abu Sitta, a local lawyer and member of a revolutionary committee, told AFP.
"The towns of Rhibat, Kabaw, Jado, Rogban, Zentan, Yefren, Kekla, Gherien and Hawamed have also been free for days. In all these towns, Kadhafi's forces have gone and a revolutionary committee put in place," he said.
Regime opponents appeared to control the city of Az-Zawiyah, 50 kilometres (30 miles) west of Tripoli, where thousands took to the streets to denounce the teetering leader in front of journalists on a guided visit.
The journalists were welcomed by thousands of demonstrators, shouting "Down with the regime, we want freedom." Some were armed and fired into the air.
No Libyan security services were visible, but Az-Zawiyah saw clashes between regime supporters and opponents last Thursday, in which a human rights group said more than 35 people were killed.
In Tripoli, residents said banks were open but bread and petrol remained tightly rationed as the rebel grip on large swathes of the vast desert nation played havoc with the distribution of goods.
Tanks and jeeps driven by regime partisans were patrolling almost deserted neighbourhoods around the capital, residents said.
Meanwhile a ferry loaded with some 1,800 Asian workers docked in the Mediterranean island of Malta. As the closest European Union member state located just 350 kilometres (218 miles) north of Libya, it has become a key hub in the desperate scramble to get foreigners out.
Malta's Prime Minister Lawrence Gonzi said his island nation had received some 8,000 people since the Libyan crisis began and he feared there could be an even greater exodus.
"There could be an escalation," Gonzi said at a news conference late on Sunday. "We have brought back from Libya more than 8,000 people representing 89 nationalities."
"If the situation continues to escalate, we'll need help from Europe and share the burden with our European partners," he said, adding that in his view the end was in sight.
French President Nicolas Sarkozy warned Europe could face an "uncontrollable" wave of refugees fleeing North Africa if unrest continues, and called on EU leaders to hold a crisis summit to develop a common response.
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