US and European leaders were weighing the use of NATO air power to impose a no-fly zone over Libya and stop Kadhafi from using air strikes against his own people on Monday.
The US and the EU have slapped sanctions on Libya, including an assets freeze, an arms embargo and travel bans on Kadhafi and his inner circle.
US authorities have blocked 30 billion euros of Libyan assets.
Kadhafi’s hold on the country appeared to be dwindling in recent days as opponents took control on several towns in the east after consolidating their hold on Libya’s eastern coast. Kadhafi however said he refuses to step down in an interview in Tripoli on Monday.
"They love me. All my people with me. They love me all. They will die to protect me," Kadhafi said.
US ambassador to the United Nations Susan Rice said the interview showed "how unfit he is to lead and how disconnected he is from reality".
"It sounds just frankly delusional, when he can talk and laugh to an American and (an) international journalist while he is slaughtering his own people," Rice said.
British Prime Minister David Cameron and French President Nicolas Sarkozy have called for a special meeting to consider “further European Union” action against the Libyan regime.
The US military meanwhile has repositioned its naval forces in the Mediterranean.