Libyan rebels 'encircling Gaddafi city of Sirte'

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Media captionIan Pannell on the significance of the area around Sirte and Bani Walid

Rebel commanders say they are moving to encircle the city of Sirte, one of the few areas of Libya still under the control of Gaddafi loyalists.

Fighters are positioned east and west of Sirte, and scouts are looking at an approach from the south.

There has been a lull in fighting as rebels join in the celebrations for the Muslim Eid al-Fitr festival.

Meanwhile, reports say rebels have captured Col Gaddafi's Foreign Minister Abdelati Obeidi.

Reuters news agency said Mr Obeidi was arrested at his farm in Janzour, a suburb of Tripoli.

Algeria sanctuary

Rebels earlier told Gaddafi loyalists in Sirte they must surrender by Saturday, or face a military onslaught.

A spokesman for Gaddafi's forces dismissed the ultimatum.

The BBC's Clive Myrie in Nofilia, east of Sirte, says rebel commanders are not expecting to launch an attack before Saturday.

He says it has been the quietest day for a week near the city, with rebels hoping that Col Gaddafi's forces will surrender before the weekend.

However, Reuters news agency reported that clashes between rebel fighters and Gaddafi loyalists had continued to the west of Sirte.

Residents of Sirte have spoken of a divided city, cut off from the outside world with no power and very little information getting through.

Col Gaddafi's whereabouts are still unknown, but it has been rumoured that he has taken refuge in Sirte - his birthplace and the home of his tribe.

Two of his sons, his daughter and his wife fled to Algeria on Monday.

Reports said clashes were also continuing around the town of Bani Walid - another place where Col Gaddafi is rumoured to be hiding.

Cash flight

Meanwhile, Western powers are moving to ease restrictions put on Libya when the Gaddafi regime was still in power.

The EU says it plans to lift sanctions on several oil firms and six port authorities to allow the rebel authorities to restart trading.

The British air force is flying into the country part of a consignment of banknotes worth about 1.8bn dinars (£950m; $1.6bn).

The banknotes, which were printed in Britain, were impounded by the government as part of the UN assets freeze targeting Col Gaddafi.

UK officials said the consignment would be handed to the central bank.

Libya's rebel government, the National Transitional Council (NTC), has outlined plans to hold elections with 18 months.

But the NTC says that timetable begins only when Col Gaddafi is caught or killed.

Many countries have now recognised the NTC as the legitimate government of the country.