SANAA, YEMEN - Heavy gunfire was reported in Tripoli Wednesday, as anti-government demonstrators clashed with loyalists of Libyan leader Moammar Gaddafi.

The longtime dictator is vowing to "fight until the last drop of my blood" to maintain his 41-year hold on power, and has called on supporters to reclaim control after a week of rebellion that has left his government's authority in tatters.

Residents in the eastern half of the country, where demonstrators have seized control, raised the flags of the old monarchy that was ousted when Gaddafi seized power, the Associated Press reported.

But the mood in Tripoli was bleak, according to the wire service. Residents were afraid to leave their houses, saying pro-Gaddafi forces were opening fire randomly in the streets. A ferry chartered by the U.S. government was preparing to evacuate American citizens to to Malta.

Facing a violent popular revolt backed by high-level defections, Gaddafi cast an ominous tone in his 70-minute address on Tuesday, referring to China's forceful response to the 1989 Tiananmen Square protests to suggest that his regime, too, would use as much force as necessary to stay in power.

"I will not leave the country," Gaddafi declared in the rambling televised speech, delivered from the remains of a presidential palace destroyed in a 1986 U.S. air raid. "I will die as a martyr at the end." He showed no remorse for attacks launched by his loyalists against his citizens, vowing instead to "cleanse Libya house by house."

The violence engulfing Libya is already the worst in more than a month of unrest that has toppled regimes in Tunisia and Egypt as it has spread across North Africa and the Middle East. Libya's military and security forces have used jets and helicopters to fight back, roiling world oil and stock markets with the prospect of disruptions in a major oil supplier.

The United States and the United Nations condemned the Libyan leader's use of military force against his citizens, with the Obama administration employing its strongest language yet to condemn the 68-year-old.

French President Nicolas Sarkozy on Wednesday said the European Union should impose sanctions on Libya, in effect cutting all economic and business ties with the North African nation.

"The continuing brutal and bloody repression against the Libyan civilian population is revolting," Sarkozy said, according to news reports. "The international community cannot remain a spectator to these massive violations of human rights."

But some long-standing allies came to Gaddafi's defense, with Nicaraguan leader Daniel Ortega phoning to help counsel him through his country's "moment of tension.''

With the Internet and other communications limited and outside journalists and observers denied access, information came mostly through secondhand reports from residents reached by phone or from people leaving Libya across its eastern border with Egypt.

Still, the consistent picture was of a country in disarray, with major oil regions now under opposition control, seaports closed, major tribes preparing for armed conflict, and intense clashes taking place in the capital, Tripoli. Residents for a second day reported seeing African troops they described as mercenaries and said they were killing civilians and firing guns into the air.

Reports of the number of dead range as high as 500 over several days of clashes, many of them in and around the coastal city of Benghazi, in eastern Libya, whose powerful tribal leaders have long bridled under Gaddafi's rule. The estimates have come from opposition groups and from human rights organizations that say they are based on reports from doctors and hospitals inside Libya.

Nations, including the United States, were working to evacuate their embassy workers and others from the country. The U.S. Embassy in Tripoli said a ferry chartered by the U.S. government was anchored near the harbor at the As-shahab Port in central Tripoli as of 11:15 a.m. local time (4:15 a.m. in Washington), and was expected to leave for Malta by 3 p.m.

At the Libyan Embassy in Sweden, diplomats allowed protesters to raise the flag of the deposed Libyan monarchy for the first time since Gaddafi took power in 1969.

Gaddafi delivered his address wearing a traditional brown turban and cloak, along with his trademark sunglasses. He seemed intent on convincing Libyans and the world that he remained in control of the country, even as defections within his regime continued to build.

Branding the opposition as "rats," Gaddafi urged his supporters to "chase them" and hand them over to the security forces.

"I have not yet ordered the use of force, not yet ordered one bullet to be fired," he said. "When I do, everything will burn." He suggested that protesters were under the influence of "hallucinogenic pills."

As the speech aired, Libyan national television showed images of hundreds of Gaddafi supporters in the capital's central Green Square, waving flags. Residents said the pro-government forces had taken over the square from anti-government demonstrators late Monday, after Gaddafi's militias opened fire.

It was not possible to verify whether the demonstrations were staged or the extent of support for Gaddafi on the streets.

Among defectors from within Gaddafi's regime, the most senior to break away was the interior minister, Abdel Fattah Younes al-Abidi, who was reported by al-Jazeera television to have urged the Libyan army on Tuesday to join the people and their "legitimate demands."

Meanwhile, Libya's ambassador to the United Nations, Abdurrahman Mohamed Shalgam, showed up to represent his government at a U.N. Security Council session called to discuss the unrest. Shalgam's appearance came a day after his deputy, Ibrahim Dabbashi, publicly turned against Gaddafi.

The turmoil that has roiled the Middle East continued to reach across the region Tuesday. In Yemen, two anti-government protesters were killed in clashes with supporters of President Ali Abdullah Saleh near Sanaa University, while tens of thousands of demonstrators rallied in the Bahraini capital, Manama, in protest of that country's monarchy.

For much of his reign, Gaddafi was reviled by the U.S. government for his regime's support of terrorism, including a 1986 attack in Berlin that brought a military retaliation from the Reagan administration. But he had won rehabilitation from the West in recent years after he forswore terrorism and opened his weapons facilities to American inspectors.

After Gaddafi's speech, some residents reached inside Libya by telephone were too afraid to speak with an American journalist. Others in Tripoli described chaos unfolding in their neighborhoods, as Gaddafi loyalists appeared to follow his demands to hunt down protesters.

In the capital's Zawiayt Dehmani and Fashloum enclaves, residents reported targeted attacks by Gaddafi loyalists.

"His people are going around shooting people," one Tripoli resident said in an e-mail, asking that his name not be used for security reasons. "Pickup trucks with uniformed men are driving in our neighborhood shooting their guns now. It is very loud outside."

In his speech, Gaddafi insisted that the youths and others engaged in the revolt against his regime were merely being "manipulated" by the uprising in neighboring Tunisia, which ended the 23-year rule of President Zine el-Abidine Ben Ali, and urged on by "mercenaries" and foreign influences.

He also presented grim scenarios to describe what could unfold in Libya if he were ousted: a country as chaotic as Iraq or Afghanistan; an Islamic state ruled by al-Qaeda; even an invasion by the United States.

He particularly targeted the people of Benghazi, threatening to cut water supplies and electricity to the city, the second largest in the country.

Residents said Tuesday that Benghazi was under the control of the protesters and that the streets were calm. Military leaders, police and other security units appeared to be supporting the opposition. Citizens were on the streets protecting neighborhoods, and banks and schools were expected to reopen in the next few days.

There was a collective sense of euphoria in the city, about 600 miles by road from Tripoli.

"This is free Libya," declared Amal Bugaigis, 50, a lawyer. "Security forces and the people in Benghazi are together. We are now one. . . . There is no more Gaddafi."

From Tripoli, there have been conflicting reports about the extent of the violence. Some residents described their neighborhoods as war zones, with people locked in their homes out of fear and foreign mercenaries and Gaddafi loyalists driving around in SUVs and military trucks. Many government buildings had been set on fire, while security forces protected the national television station.

But other residents of the capital said their neighborhoods were calm.

"There is no bombing of the city, at least not where I live," said a second resident of Tripoli, who also spoke on the condition of anonymity and said that he did not support Gaddafi. "I am speaking frankly. It's very calm."

But the first Tripoli resident said that there were no ambulances available and that some were shot up and set ablaze by Libyan mercenaries working to protect Gaddafi's regime. There were "reports of mercenaries riding in ambulances and shooting at people," the resident said.

In Tajoura, an enclave on the eastern end of the capital, there were reports of corpses and wounded people left on the streets because airstrikes had blocked access to the area, the resident said.

Correspondents Leila Fadel in Tobruk, Libya, and Janine Zacharia in Abu Dhabi, United Arab Emirates, and staff writers Column Lynch at the United Nations and William Branigin, Howard Schneider and Debbi Wilgoren in Washington contributed to this report.