Muammar Gadhafi is sounding out the possibility of handing over power, a Russian newspaper reported on Tuesday, but the Libyan government denied it was in talks about the veteran leader stepping down.

Five months into a conflict that has embroiled NATO, there has been a flurry of reports about talks on Gadhafi ending his four decades in power in exchange for security guarantees.

Russia's respected Kommersant newspaper based its story on a high-level source in Moscow. The report was denied in Tripoli, and Italy said it believed talk of a deal was a ruse by Gadhafi's administration to sow confusion.

"Information about negotiations about Gadhafi stepping down or seeking a safe refuge inside or outside the country is simply untrue," Libyan government spokesman Moussa Ibrahim told Reuters.

"Gadhafi is not negotiable, this is our position of principle, and the future of Libya will be decided by Libyans. Gadhafi is an historical symbol, and Libyans will die to defend him," said Ibrahim.

The United States reiterated its position that Gadhafi should step down. "We support whatever's going to get us to a place where Gadhafi knows it's time for him to go," State Department spokeswoman Victoria Nuland said.

Fighting between government forces and rebels continued, with rebels taking some of the heaviest shelling in recent weeks.

A Reuters reporter in Misrata, 200 km (130 miles) east of Tripoli, said rebel positions in the Dafniya district on the city's western outskirts came under heavy artillery fire on Tuesday.

The bodies of rebel fighters were taken to Misrata's al-Hekma hospital and a hospital source said the death toll from the shelling had risen to 11 with 42 fighters wounded.

Many of them were in a critical condition, and some would need to have limbs amputated, staff at the hospital said.

On Monday, Gadhafi's forces ambushed rebels south of Misrata, killing six and injuring 22, said Abdelsalam, a rebel spokesman in Misrata.

The rebels said again they would not compromise on letting Gadhafi remain in the country as a free man.

"Any solution that doesn't include Gadhafi stepping down and facing trial or leaving Libya is unacceptable," Abdelsalam said.

"Seeking guarantees"

Some analysts say Gadhafi is starting to contemplate an exit as shortages of cash and fuel, the NATO bombing campaign and rebel military pressure shorten the odds on him being able to hold on to power.

But Western diplomats caution it is in Gadhafi's interest to send out conflicting signals about possible deals, in the hope of sowing confusion among the rebels and the fragile Western alliance trying to push him out.

Kommersant newspaper reported Western powers, including France, were receptive to a deal with Gadhafi if he agreed to step down.

"The colonel (Gadhafi) is sending signals that he is prepared to relinquish power in exchange for security guarantees," the newspaper quoted what it called a high-level source in the Russian leadership as saying.

The report came a day after Russia hosted South African President Jacob Zuma -- who has tried to broker a peace deal for Libya -- and NATO Secretary General Anders Fogh Rasmussen for talks which focused on Libya.

After his return from Russia, Zuma's office issued a statement saying he had asked NATO to persuade the rebel National Transitional Council to come to the negotiating table.

Turkey is hopeful that Western and Arab governments could help put in place the framework of a solution to the crisis by next month, its foreign minister said.