The seizure by Libyan rebels of two key oil towns could produce "a very different political dynamic" in Colonel Muammar Gaddafi's regime, Defence Secretary Liam Fox said today.
The rebels continued their rapid advance westwards, taking the coastal towns of Brega and Ras Lanuf as the regime's forces fell back in the face of coalition air strikes.
Dr Fox said that the rebel gains could give them effective control of Libya's entire oil export industry, potentially weakening Colonel Gaddafi's grip on power in Tripoli.
"As they move round the coast, of course, the rebels will increasingly control the exit points of Libya's oil," he told BBC1's The Andrew Marr Show.
"That will produce a very dynamic and a very different equilibrium inside Libya. How that will play out in terms of public opinion and the Gaddafi regime remains to be seen."
The latest rebel advance came after coalition air strikes - including by RAF Tornado GR4s - targeted the regime's tanks and armoured vehicles around the strategic town of Ajdabiya, which fell to the rebels yesterday.
That opened the path to Brega, a major oil export terminal, and the massive oil refining complex of Ras Lanuf, which together accounted for a large slice of Libya's 1.5 million barrels a day of exports, before production stopped with the uprising last month.
Dr Fox told Sky News's Murnaghan programme: "There is no doubt that we've given a fillip to the rebels, that they have increased confidence and I hope that what will ultimately happen is that, without further bloodshed, the people of Libya will rise up and be able to determine what sort of government they want."
US Defence Secretary Robert Gates said that Col Gaddafi's capability to move armour to threaten the rebels' strongholds in the east, such as Benghazi, had "pretty well been eliminated".
"We will have to keep our eye on that because he still has ground forces at his beck and call but the reality is that they are under a lot of pressure," he told ABC television in the United States.
"There are some signs that they are moving back towards the east."
After he last week appeared to open up the possibility that Col Gaddafi could be a legitimate target for air strikes, Dr Fox made clear that the coalition did not target individuals.
His earlier comments had appeared to put him at odds with the Chief of the Defence Staff, General Sir David Richards, who said that targeting regime figures was not allowed under the terms of United Nations Security Council resolutions.
Dr Fox said: "We don't target individuals. The aim of the UN resolution is very clear, it is about protecting the civilian population.
"If Col Gaddafi now goes, that of course is a bonus. Losing Gaddafi is an aspiration, it is not part of the UN resolution."
Dr Fox also ruled out supplying arms to the rebels, who cannot match the superior firepower of Col Gaddafi's forces, as it would fall foul of the UN arms embargo on Libya.
"We are not arming the rebels, we are not planning to arm the rebels," he said.
He was, however, forced to deny press reports that he had been frozen out of key decisions on Libya by David Cameron, dismissing them as "media tittle-tattle".
"If what I read in the papers this morning is true, I must have been imagining all those meetings I have been at in the last three weeks and the phone calls late at night, including from the Prime Minister," he said.Reuse content