In a cloud of dust and rumours, Gaddafi loyalists flee the country

Hunt for the dictator goes on as peace talks fail

Rebel fighters pass a burnt-out car close to Misrata yesterday, as reports claimed Gaddafi loyalists were negotiating the handover of Bani Walid (EPA)

The convoy had snaked through the arid and unforgiving desert, up to 250 four-wheel-drive cruisers and trucks heading across the Libyan border.

Soon tales began to emerge that they were laden with gold bullion and cash, gunmen and weapons, and – the most elusive of prizes for the country's rebels – Muammar Gaddafi himself.

The feverish reports began even before the cloud of sand and dust from the vehicles had disappeared into Niger. The fallen Libyan dictator and his son Saif al-Islam, it was said, had at last accepted defeat in the bitterly fought civil war and were en route for exile in Burkina Faso, in a deal brokered by the French government.

The escape had been allowed, with Nato avoiding carrying out air strikes, this account went, to avoid a bloodbath in the taking of the remaining regime strongholds in the country: Sirte, Sabah and Bani Walid. With Gaddafi and the diehards gone, the long impasse would be ended with the revolutionaries making peaceful entries into the towns.

At least some of the convoy had come from Sirte, the country's new administration, the Transitional National Council (TNC) held. Fathis Baja, an official, maintained that substantial amounts of gold and cash had been ransacked from the Sirte branch of the Central Bank of Libya. "There were 10 vehicles carrying gold, euros and dollars which crossed from Jufra into Niger with the help of the Tuareg [tribesmen] from the Niger," he said.

Ali Tarhouni, deputy chairman of the TNC, said his government accepted the account of the large convoy although they were not yet certain that Gaddafi was a passenger. A spokesman for the rebels' military wing, Abdelrahman Busin, added: "That's how Gaddafi used to travel here, so I wouldn't be surprised if it was him." He admitted he did not know if this had happened.

The former regime's spokesman, Moussa Ibrahim, who is believed to be holed up in Bani Walid, denied that Gaddafi had fled. In a phone call to the Syrian TV station al-Rai, he insisted that "The Guide" was "in excellent health, planning and organising for the defence of Libya. We are fighting and resisting for the sake of Libya and all Arabs. We are still strong and capable of turning the tables on Nato".

Burkina Faso has been the recipient of Gaddafi's largesse on aid when he was in power and its government has stated that it would welcome him "if he wishes it". The country, along with Niger, is a signatory to the International Criminal Court, which has issued arrest warrants for the former leader and Saif. But both also belong to the African Union, which has called on member countries to disregard the warrants.

The account of Gaddafi's departure had been presented by military officials in France and Niger. But the governments in both the countries refused to confirm it and insisted that they were unaware of the whereabouts of the former leader. That also remained the official position of Burkina Faso authorities, who denied that they were aware of the arrival of a Libyan entourage. American officials said last night that, to the best of their knowledge, the former dictator was still in Libya. Speaking publicly for the first time since being appointed the UK's Special Representative to Libya, Dominic Asquith said he still needed to clarify the most recent reports.

"We have reports over the past few days about a number of pro-Gaddafi forces trying to exit the country," he said. "I hope it points to an underlying fact, which is that many of the pro-Gaddafi forces are realising that the game is up. The Prime Minister made clear yesterday in the House, from our point of view, that he's got to face justice, but this is a Libyan issue."

There has already been one confirmed move by road into Niger using a desert corridor from Libya: by Mansour Dhao, the head of Gaddafi's personal protection detachment, and 10 other senior officials on Sunday. According to French military sources, this was to prepare the way for the bigger convoy, manned by Tuareg who had been fighting for the regime, with the operation co-ordinated by General Ali Khana, the head of the loyalist forces in the south.

Gaddafi and Saif, said a source, were due to join the convoy on the way and move on to Burkina Faso. Yesterday an aide to Nicolas Sarkozy, the French President, said: "We have no specific indication that Gaddafi is there". Niger's envoy to the UN in Geneva, Adani Illo, pointed out the difficulties of tracing people in such a terrain. "The desert zone is vast and the frontier is porous," he said. "A convoy of 200 to 250 vehicles, it'll be a drop of water in an ocean."

Colonel Roland Lavoie, the chief spokesman at Nato's Libyan operations base in Naples, said: "Our mission is to protect the civilian population of Libya, not to track and target thousands of fleeing former regime leaders, mercenaries, military commanders and internally displaced people."

By yesterday evening, the only confirmed sighting of anyone travelling in the convoy was a dishevelled Tuareg leader, Rhissa ag Boula, who once led an uprising against the Niger government with funding from Gaddafi. Local people said that many of the cars had curtains drawn across the back windows. The departure of Gaddafi forces from Libyan soil did not resolve the stand-off between rebels and loyalists. A meeting was held at a mosque in the village of Wishtata between elders from Bani Walid and rebel fighters. One of the elders said the town was "split into two groups – the first and majority want peace, the second are people who are implicated with the regime either by blood or money and they are cowards". He failed to explain how "cowards" could hold a town of 50,000 for such a time.

Abdullah Kenshil, the chief negotiator for the new administration, insisted: "We have not come to humiliate anyone. We don't want revenge and we don't bear grudges." In reality, dozens associated with the regime, in particular black people accused of being mercenaries, have been killed by the rebels.

As the elders made their way back to Bani Walid with the rebel conditions – that regime supporters disarm and the local radio station be shut down – there was wild celebratory gunfire following reports, on the state TV station now controlled by the rebels, that Sirte had surrendered.

Around that time, said journalists on the Sirte front line, the loyalist forces started a bombardment, forcing the rebels to retreat.