A defiant Moamer Kadhafi said he is ready to "sacrifice" to defeat rebels battling his forces after they warned the deadline for the veteran strongman to step down and stay in Libya has expired.
"We are not afraid. We will defeat them," Kadhafi said in an audio message broadcast late Wednesday, referring to the NATO alliance and the insurgents.
"We will pay the price with our lives, our women and our children. We are ready to sacrifice (ourselves) to defeat the enemy," he added in a message to loyalists in the town of Zaltan near the Tunisian border.
Kadhafi also called on his partisans to march on the rebel-held Nafusa mountainous region, southwest of the capital Tripoli, and called on his opponents to surrender.
"Traitors, surrender your weapons... Choose: death or surrender," Kadhafi told the rebels, adding that without support from NATO the insurgents could not have seized the strategic mountainous region.
Rebels are using the Nafusa as a springboard for their advance on the Libyan capital to overthrow Kadhafi's regime.
Kadhafi's message came after the chief of the rebel National Transitional Council said in their Benghazi headquarters that an offer they had made through the UN that would have allowed the strongman to remain in Libya if he stepped down had lapsed.
NTC chairman Mustafa Mohamed Abdel Jalil said the rebels had delivered to UN special envoy Abdul Ilah al-Khatib "a very specific, well-intentioned offer that Kadhafi can stay in Libya under three conditions.
"We made a proposal. The deadline has passed. The proposal has expired," he told reporters of the month-old offer.
Under the offer, Kadhafi would have had to step aside and relinquish all responsibilities, his place of residence would be the "choice of the Libyan people" and he would be under "close supervision," Abdel Jalil said.
"The period of this proposal has passed," he said. "We cannot ignore the fact that the people who have been standing against him want him out."
Meanwhile, Britain gave a major boost to the rebels by inviting them to take over the Libyan embassy in London, which the Kadhafi regime slammed, while Washington said it was examining a request by the rebels to recognise the insurgents.
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In London British Foreign Secretary William Hague said Wednesday his country has expelled all remaining staff at the Libyan embassy and recognised the NTC as Libya's sole legitimate government, inviting it take over the embassy in London.
"The prime minister and I have decided that the United Kingdom recognises and will deal with the National Transitional Council as the sole governmental authority in Libya," Hague said.
And in Washington State Department spokesman Mark Toner said the United States was also reviewing a request by Libya's rebels to open an embassy in the US capital.
"They did send an official request regarding the reopening of their embassy and we're reviewing that request. And we'll work through these issues," he said.
Libyan Deputy Foreign Minister Khaled Kaaim slammed Britain's decision as "irresponsible and illegal" under British and international law, while the NTC chairman hailed the British decision.
"We consider this irresponsible, illegal and in violation of British and international laws," he said, adding that Kadhafi's regime "will take necessary actions," in British and international courts.
For his part, the NTC's Abdel Jalil said "we express tremendous appreciation for this recognition."
The council expects the United Kingdom and Turkey to become the first countries to release some of Libya's frozen assets, which he said "unfortunately have not been liquidated to date."
In that vein, Hague said Britain would also unlock £91 million ($149 million, 102 million euros) of Libyan oil assets frozen under a UN Security Council resolution so that the rebels could benefit from them.
Abdel Jalil promised that the rebels would honour all of Libya's international agreements made prior to February 17 and that it would comply with the wishes of the international community over the fate of Kadhafi, who is now a "wanted man."
The British coordinator for the NTC, Guma al-Gumaty, told the BBC that Britain's recognition "is definitely a very strong move, a very significant one."
"It also sends a very strong message to Kadhafi and those close to him that he is finished," he added.
Loyalists troops and rebels have fought their way into a stalemate five months after the start of a popular uprising that quickly turned into a civil war.
The Libyan leader is in control of much of the west and his Tripoli stronghold, while the opposition holds the east from their bastion in Benghazi.