Gadhafi Compares Himself to Queen Elizabeth, Says Libya's Youth are on Hallucinogens

VIDEO: Alex Marqaurdt on reports the noose is tightening around the Libyan leader.
WATCH Libya Protests: Is Gadhafi Losing His Grip?

Libya's embattled dictator Moammar Gadhafi gave a bizarre speech by phone today to claim the revolt was the work of Osama bin Laden, that rebellious youth had been given hallucinogens, and to complain that the Queen of England has ruled longer than him and no one is asking her to step down.

Gadhafi's defense of his government came amid reports that his army of African mercenaries has begun to strike back at protesters, using an anti-aircraft gun to blast the minaret off a mosque where opposition demonstrators had sheltered and attacking the protesters with automatic weapons.

His speech was followed by an announcement from the Swiss foreign ministry that assets in Switzerland belonging to Gadhafi, his family and his accomplices will be frozen immediately. The freeze is valid for three years.

Today marked the second time the Libyan dictator has addressed the nation in recent days, although this time it was by phone to state television. The speech was often incomprehensible.

"The requests come from bin Laden," Gadhafi said in a rambling speech. "They have been brainwashing the kids and young people... teaching them how to misbehave."

"People with any brains will not take part in these protests," he added. "They are taking advantage of the young age of these people because they are not legally liable for punishment."

The eccentric leader directly addressed the people of Az-Zawiyah, an oil rich town west of Tripoli, where anti-government forces are reportedly in a battle with Gadhafi's supporters. He ordered the residents to "control your children." "They are loyal to bin Laden," he said.

President Obama on Wednesday joined other world leaders in condemning this week's violent government crackdown on Libyan protesters who have held firm in their efforts to oust Gadhafi as he struggles to maintain power.

More videos have emerged of Gadhafi's forces firing on protesters from helicopter gunships, and a fighter jet dropping bombs. Human rights groups say they've confirmed 300 deaths. Witnesses said the number could be as high as a 1,000.

But one of Gadhafi's sons said on state TV today that the death toll was inaccurate and "talking about hundreds and thousands [killed] is a joke." Seif al-Islam said Libya was open to journalists. The country has allowed some selected news organizations to come, but the State Department warned against any unauthorized travel by news media.

A clear east and west divide is emerging in Libya.

Gadhafi's grip on power appears to be slipping in the eastern half of the country and some parts of the west. On Wednesday, reports emerged that anti-opposition groups had taken control of the town of Misrata, west of Tripoli, and today, some eye witnesses described a brutal battle between anti-Gadhafi groups and his supporters in Az-Zawiyah for control of the oil-rich city.

According to various reports, the opposition in Az-Zawiyah had taken tanks and was in the process of fighting to take control. A victory in Az-Zawiyah would be a big boon to protesters. This is the same town where activists occupying a mosque were killed by Gadhafi supporters using anti-aircraft missiles and automatic weapons. Earlier today, eyewitnesses described the violence in the city as a "massacre."

Benghazi -- Libya's second largest city located in the east -- appears to be under opposition control. Rsidents are reportedly being given weapons looted from security forces, and they say they're sending weapons and manpower to Tripoli to help protesters there fight Gadhafi's mercenaries.

"There is no civil war. This is revolution," a man in eastern Libya told ABC News.

In King Idris Square in Tobruk -- located in northeast Libya -- around 1,500 very energized protesters were demonstrating and celebrating today, chanting, holding up peace signs, some even firing pistols from cars.

The all-green Libyan flag was replaced by the red, black and green flag of the pre-Gadhafi monarchy, and was being waved from honking cars, carried through the crowds and painted on children's faces.

The accusations leveled at Gadhafi and the calls for him to leave were passionate but familiar. Residents complained that they had no voice, jobs, proper education, health care and a murderous regime. But what is unique to Libya -- and repeated by almost everyone ABC News spoke with -- was they feel there's no reason Libyans should be so poor given the country's vast oil wealth. Many said they would fight until Gadhafi left and were willing to die for the cause.

"We are all Libyans, we are one team," said a lawyer wearing his black robes. "There's no division between us, all one team. And we will fight as one team until we die or he's out."

Tripoli, however, is a different story. Residents say the nation's capital is still under siege by Gadhafi's forces. One reporter said people were going about their daily lives but there was an ongoing sense of fear after the crackdown killed hundreds in recent days.

An American-educated engineer who lives in suburban Tripoli told ABC News he was anxious and that the streets are very dangerous. He said four of his neighbors were killed. He added that Tuesday was the worst day so far, with guns and planes and helicopters, and cars without license plates roving the streets and shooting at any protesters who assembled.

Gadhafi appears to be losing momentum among his own government. Libya's ambassador to Jordan today became the latest in the long line of international diplomats to resign and condemn the violence against people. Meanwhile, Ahmed Gadhaf al-Dam, one of Gadhafi's closest aides and also a cousin, said he has defected to Egypt in protest of the deadly crackdown.

Obama said the United States is preparing a full range of options to respond to the crisis, including no-fly zones to prevent attacks and proposals for oil companies to stop operations in the world's 12th-largest oil exporter.

But NATO today said it had no plans of intervening in Libya, saying that would require a United Nations mandate.

"I cannot consider the situation in Libya a direct threat to NATO or NATO Allies, but, of course, there may be negative repercussions," NATO Secretary General Anders Fogh Rasmussen said in a statement. "Such upheaval may have a negative impact on migration, refugees, etc., and that also goes for neighbouring countries."

A no fly zone -- which Libyans are requesting to stop Gadhafi's aerial attacks -- would have to have the approval of NATO at the very least. Libya currently remains a member in good standing of the U.N. Human Rights Council.

Americans, Foreigners to Evacuate Libya

Thousands of foreigners, including hundreds of Americans, are being evacuated from Libya.

The scene at the Tripoli airport was chaotic. Air passengers converging on the busy airport said people were shoving and climbing over each other to get on planes.

Americans trying to leave aboard a ferry that was supposed to depart for the island of Malta were delayed again by bad weather. The ferry is expected to now depart on Friday.

"The ferry evacuating American citizens and some third country nationals will not leave port today due to inclement weather," U.S. State Department spokesman Elijah Waterman in Malta said. "Passengers will remain on board, there are provisions available, and the ship is secure. The ferry will depart as soon as weather conditions permit."

Inside Gadhafi's Family

As Gadhafi tries to hold his grasp on Libya, more details about his own family's odd and lavish lives have trickled out.

After reports of his daughter's safe landing in Malta, Ayesha al-Gaddafi appeared on state TV, declaring that she was not leaving; a message the entire family seems to be sending.

A Wikileaks-obtained U.S. diplomatic cable calls the family "Gadhafi Incorporated" with all siblings getting big jobs and big money, while other cables paint them as hard partiers who have "provided ... enough dirt for a Libyan soap opera."

The family tree has several branches, with eight children in the Gadhafi household.

The eldest son, Muhammed, is chairman of the general post and telecom company, which operates cell phone and communications across Libya.

Second oldest son Seif al-Islam, who vowed days ago that his family would fight until the last bullet, is widely seen as the frontrunner to replace his father.

Brother Mutassim, also Libya's national security adviser, paid Beyonce more than $1 million last year to perform at a party in St. Barts.

He paid Mariah Carey $1 million a year earlier.

Brother Hannibal was forced to leave his $7,000 a night suite in a London hotel after he was accused of physically abusing his wife, Aline.

Ayesha al-Gaddafi is the only daughter, a lieutenant-general in the Libyan Army and a law professor.

She was part of Saddam Hussein's 2004 defense team after his capture.

Recent cables appearing on Wikileaks seem to indicate it is power the Gadhafi sons most want, and constantly battle each other to get it.

"There has been quite a bit of competition between the sons," said Dirk Vandewalle, associate professor of government at Dartmouth College Hanover, N.H. "In a way, they are spoiled and divorced from reality, as all of their actions have indicated."

ABC News' Lama Hassan, Miguel Marquez and Emily Schmidt contributed to this report.