“Kadhafi has been financing the AU – 20 per cent or more of their annual budget,” says Richard Cornwell at the Institute of Security Studies. “He’s been paying the annual dues to the AU of about 15 to 20 states, so he has a very good patronage system working.”
Nigeria and Mauritania have also condemned the crackdown, and US president Barack Obama has called on the world to unite in holding Libya accountable for its reaction to protests.
"The suffering and bloodshed is outrageous, and it is unacceptable," Obama said, denouncing "threats and orders to shoot peaceful protesters" as a violation of international law.
A statement on the internet claiming to be from Al-Qaeda in the Islamic Maghreb (Aqim) declared support and aid to the revolution, describing the people's demands as "legitimate".
Kadhafi opponents are reportedly in control of Libya's east coast, from the Egyptian border through to the cities of Tobruk and Benghazi. Government soldiers are switching sides to join the uprising.
Tobruk is about 100 kilometres from the border and Benghazi some 400 kilometres further west.
In the country's third city of Misrata, Kadhafi loyalists fired machine guns and rocket-propelled grenades at demonstrators on Wednesday, killing several people, witnesses said.
Saadi, Kadhafi's third son, told Thursday's Financial Times that there could be a new government but with his father playing a key role.
"My father would stay as the big father who advises," he said. "After this positive earthquake, we have to do something for Libya. We have to bring in new blood to govern our country."
He added that 85 per cent of Libya was calm and that army battalions were ready to strike against protesters.
Oil sold in New York for more than 100 dollars a barrel level – prices not seen since 2008.
Deputy Foreign Minister Khaled Khaim said Al-Qaeda had set up an Islamic emirate, headed by a former Guantanamo Bay inmate, in Derna, between Tobruk and Benghazi.
But local residents dismissed the reports, saying the Libyan government was trying to "scare Europe".
Italian Foreign Minister Franco Frattini meanwhile warned of an "exodus”, with 300,000 Libyans possibly fleeing to Europe.
Some 5,000 people have arrived at the border with Tunisia and 15,000 at the border with Egypt, according to the UN.
At least 640 people have died in the crackdown, according to the International Federation for Human Rights, but Kadhafi's former protocol chief, Nouri el-Mismari, said the death toll had surpassed 1,000.