Cash-strapped Libyan rebels won a financial lifeline potentially worth billions of dollars from the United States and other allies on Thursday, as forces loyal to Muammar Gaddafi pounded a rebel town in the west.
US Secretary of State Hillary Clinton said Washington would seek to unlock some of the $30 billion of Libyan state funds frozen in the United States to help the rebel movement.
Italy, host of a meeting in Rome of the "Contact Group" on Libya, said a temporary special fund would be set up by allied nations to channel cash to the rebel administration in its eastern Libyan stronghold of Benghazi.
A rebel spokesman in Zintan, southwest of the Libyan capital, said pro-Gaddafi forces had fired about 50 Russian-made Grad rockets into the rebel-held town so far on Thursday.
The spokesman, called Abdulrahman, said the first salvo landed at about 6:45 (0445 GMT).
He said NATO air strikes had destroyed at least two government helicopters near Zintan as they were being transported on trucks.
As the fighting has generally descended into a stalemate, the rebel Transitional National Council (TNC) says it needs up to $3 billion to keep going in the coming months.
But efforts to unblock Libyan state assets frozen in overseas accounts, or to allow the rebels to get past U.N. sanctions that prevent their selling oil on international markets, have been held up so far.
Clinton said Washington hoped to change the law to allow it to use some of the more than $30 billion of frozen Libyan assets in the United States to help the Libyan people.
"I'm pleased to announce that the Obama Administration, working with Congress, has decided to pursue legislation that would enable the U.S. to tap some portion of those assets owned by Gaddafi and the Libyan government in the United States, so we can make those funds available to help the Libyan people," she said.
As ministers gathered in Rome, Clinton said: "We'll be discussing a financial mechanism, we'll be discussing other forms of aid."
But there was a cautious response from Britain, which said it had no plans to contribute to the new fund set up for the rebels because it had already made a "very substantial" contribution to humanitarian assistance.
So far, the rebels have been recognised by France, Italy and Qatar. A rebel spokesman said on Thursday that Denmark, Spain and the Netherlands had followed suit, but officials from those countries denied it.
Thursday's meeting brings together foreign ministers from more than 20 countries including France, Britain, the United States, Italy and Qatar as well as representatives of the Arab League and the African Union.
Rebel spokesman Mahmoud Shammam told reporters that the rebels only had enough funds to pay for their immediate needs in food, public salaries and medicine until the end of May.
They needed $2-3 billion dollars in urgent funding, he said.
"No envelope of cash"
The meeting is not expected to address military issues but ministers are likely to restate their confidence in the NATO mission, despite a lack of progress since the initial air strikes drove Gaddafi's forces away from Benghazi in March.
Signs of impatience with the coalition's lack of coherence have emerged. French President Nicolas Sarkozy is planning a separate conference of the "friends of Libya" in the coming weeks to discuss the future of the country.
Of particular concern is the fate of civilians in the surviving pockets of resistance to Gaddafi in cities in western Libya such as Misrata and Zintan.
An aid ship defied shelling by Gaddafi's forces to rescue more than 1,000 people from Misrata but was forced to leave behind hundreds of Libyans desperate to flee the fighting.
"The boat arrived safely this morning in Benghazi," International Organisation for Migration spokeswoman Jemini Pandya said on Thursday.
Misrata's port is a lifeline for the city, where food and medical supplies are low and snipers shoot from rooftops. In all about 13,000 people have been rescued by 13 ships.
The IOM hoped to carry out a further evacuation mission, but this would depend on the security situation, Panyda said.
The United States on Wednesday condemned the continued shelling of Misrata and called on Gaddafi's forces to permit the IOM to resume evacuating wounded people from the port.
The insurgents trying to topple Gaddafi after 41 years in power had hoped for a swift victory, akin to the ousting of the leaders of neighbouring Egypt and Tunisia by popular uprisings.
But his better-equipped forces halted the rebels' westward advance from Benghazi, and the front line is now largely static.
The United States, Britain and France, leading a NATO air campaign, say they will not stop until Gaddafi is toppled.
Britain said it had expelled two more Libyan diplomats from London, days after it ordered the country's ambassador to leave.
"I ordered the expulsion of the two diplomats on the basis that their activities were contrary to the interests of the UK," Foreign Secretary William Hague said.
On Sunday, Libyan ambassador Omar Jelban was given 24 hours to leave Britain after the British government said its embassy in Tripoli had been attacked.
The attack on the British mission followed a NATO air raid on Tripoli that the Libyan government said had killed Gaddafi's youngest son and three of his grandchildren.