European Union (EU) foreign ministers have agreed to look into the possibility of using frozen Libyan funds to assist rebels opposing Libyan leader Muammar Gaddafi.

A statement agreed on by EU ministers meeting in Luxembourg on Monday said the bloc acknowledged the urgent financial needs of the rebel transitional council in Libya.

Libya's cash-strapped rebel authority said on Sunday it expected to start replenishing its empty coffers this week with the first batch of money promised by its foreign allies.

The rebels need more than $3bn to cover salaries and other needs in the next six months and have won promises of financial assistance from its western and Arab supporters.

However, based in the eastern coastal city of Benghazi, rebels say they have yet to receive any cash from abroad and have been increasingly bitter in their criticism of western nations.

In an interview with Reuters, Libya's rebel oil chief Ali Tarhouni lashed out at the West on Saturday, accusing it of failing to keep its promises to deliver aid.

Rebel optimism

Abdel Hafiz Ghoga, the vice-chairman of the rebel National Transitional Council (NTC), said he hoped the money would land soon.

"To this day we have not received any promised money. The mechanism is now in place and the funds should have been deposited last week," he said.

"We are very optimistic that the money will be made available in the coming days... We believe this money will be deposited very shortly."

Libya's economy relies on oil exports and the rebels have struggled to make ends meet as damage to energy infrastructure caused by the civil war has brought production to a halt in what used to be a major OPEC oil producer in North Africa.

Libyan rebels are also sending a leader to China aimed at securing better ties with Beijing.

Mahmoud Jibril, the chairman of the executive board of the NTC is to visit China for two days from Tuesday, the Chinese foreign ministry said on its website, mfa.gov.cn.

China has not taken a firm side in the war between Gaddafi's forces and the opposition groups, and has said its recent meetings with Libyan government and rebel representatives are part of an effort to encourage a ceasefire and negotiated end to the war.

Courting the rebels so openly however, has marked a policy adjustment for China, which while never a close ally of Gaddafi, generally avoids involvement in domestic conflicts.

Beijing this month hosted Abdelati Obeidi, Gaddafi's foreign minister, and China said its door was also open to the NTC.

Fighting near Nalut

The rebels have been battling Gaddafi's forces for months, seeking to end his more than four decades long rule.

On Monday, the rebels suffered a setback as they failed to dislodge Gaddafi's troops from the valley beneath the western town of Nalut after three days of fighting.

Al Jazeera's James Bay, reporting from western Libya, said the setback showed the limits of the opposition fighter's firepower and military ability.

"The offensive was entirely carried out by fighters from Nalut, a town that has been repeatedly shelled by Gaddafi forces in the valley,"he said.

"Fighters in other towns said they could have helped but were not invited to join the operation, and were not told about it in advance.

"Nalut, on the mountain top, is well-defended and it is highly unlikely Gaddafi forces could recapture it. But it remains in range of Grad missiles fired from the plain," he said.

Rebel commanders said they would regroup and launch another assault on Gaddafi's troops soon.

Source: Al Jazeera and agencies