* Russia, Germany reluctant on no-fly, U.S. closer
* Leadership on Libya key to repairing French foreign policy
* Gaddafi advances, U.N. to meet on Wednesday
* For related news stories click on
(Updates with U.N. draft resolution)
By John Irish and Tim Hepher
PARIS, March 15 (Reuters) - The G8 powers failed on Tuesday to agree on a no-fly zone over Libya, a setback to the chances of swift action to halt Muammar Gaddafi’s advance against rebel forces that leaves the ball with the U.N. Security Council.
In a blow to France’s efforts to use the crisis in Libya to reassert its leadership in international diplomacy, a G8 meeting resisted French pressure to come out in support of a no-fly zone and made no mention of the issue in its final communique.
The Libyan crisis dominated the first meeting of France’s Group of Eight presidency, but Germany and Russia blocked flight restrictions sought also by Britain, leaving the group with a position that contained strong words but little substance.
“The Americans are moving towards the security council, the Russians want more detail on the no-fly zone and are cautious, but the Germans blocked it completely,” a G8 diplomatic source said after the talks.
“We are in a race against time between building a politically legitimate operation and taking action.”
The stalemate echoed a lack of consensus over the issue at the U.N. Security Council, of which Russia is a permanent veto-holding member and Germany a temporary member.
Gaddafi’s forces seized two strategic towns in eastern Libya on Tuesday, forcing insurgent fighters to retreat and opening up the road to Benghazi.
In New York, members of the U.N. Security Council are expected to receive a draft resolution later on Tuesday (2000 GMT) calling for a no-fly zone and stepped-up sanctions against Gaddafi and his inner circle, council diplomats told Reuters.
The 15-nation body is not expected to vote on the draft on Tuesday, as most member states will need time to consult with their capitals about the no-fly zone, the diplomats said.
Veto powers Russia, China and the United States, along with Portugal, Germany and South Africa are among the members that have doubts about the idea of a no-fly zone for Libya.
Russian Foreign Minister Sergei Lavrov said a call by the Arab League for a no-fly zone over Libya was short on detail and more information was needed on how it could work, given the Arab League’s opposition to foreign military intervention.
“We are waiting for the Arab League to make specific proposals,” he told media in Paris. “We need to have more specific information to see how our friends in the Arab League see that and once we have that we will consider all options.”
The G8 communique stated that Libyans had the right to democracy and that Gaddafi faced “dire consequences” if he ignored citizens’ rights. It urged the U.N. Security Council to increase pressure on him, including via economic measures.
It stressed the importance of the Arab League’s involvement in any action taken in the OPEC oil exporting nation.
France and Britain have led calls for an internationally enforced no-fly zone to slow the advance of Gaddafi’s troops, who are using airpower and tanks to crush a revolt.
The counter-offensive against poorly armed rebels fighting to end 41 years of Gaddafi’s rule has pushed insurgents 100 miles (160 km) eastwards in a week and analysts worry that the slowness to respond will mean more bloodshed.
French Foreign Minister Alain Juppe admitted early in the talks he had been unable to win G8 backing for a no-fly zone.
Delegate sources said opposition was strongest from Germany.
“Military intervention is not the solution. From our point of view it is very difficult and dangerous,” German Foreign Minister Guido Westerwelle told reporters. “We do not want to get sucked into a war in North Africa and we would not like to step on a slippery slope where we all are at the end in a war.”
The United States has also called for more clarity on what the no-fly zone sought by the Arab League would entail.
France’s failure to secure a stronger G8 agreement will irk President Nicolas Sarkozy, who is intent on showing leadership on Libya to repair the damage to France’s image from its foreign policy blunders during the revolt in Tunisia. “They want to debate the question in so much depth that Gaddafi will have time to enter Benghazi about 15 times,” the diplomatic source said of the stalemate, referring to the rebels’ eastern stronghold city.
Juppe — appointed last month when Michele Alliot-Marie quit over her clumsy handling of Tunisia — also said that while the outside world dragged its feet, Gaddafi’s troops were advancing and that using military force earlier may have prevented that.
British Foreign Secretary William Hague said the G8 agreed on the need for further measures but not on what they might be.
Ministers discussed ideas like establishing “safety zones” in Libya and ramping up sanctions, but Hague stressed that any action would be agreed via the U.N. Security Council.
“There is common ground here in the G8 and while not every nation sees eye to eye on issues such as the no-fly zone, there is a common appetite to increase the pressure on Gaddafi,” Hague told reporters, mentioning tighter sanctions as one idea.
“We are clear here at the G8 that there is a need for further measures, a need to respond urgently,” he said.
U.S. Secretary of State Hillary Clinton met Mahmoud Jebril, a member of the Libyan National Council opposition group, in Paris on Monday but left for Cairo before the main G8 talks. (Additional reporting by Vicky Buffery, Leigh Thomas and Laure Bretton and Lou Charbonneau in New York; Writing by Catherine Bremer; Editing by Elizabeth Piper)