DAMASCUS (AFP) - President Bashar al-Assad has insisted he will not step down and blasted Britain's support for his foes, as opposition chief Ahmed Moaz al-Khatib visited north Syria on Sunday and hundreds were reported killed in a battle.

"We are ready to negotiate with anyone, including militants who surrender their arms," Assad told Britain's Sunday Times newspaper in a rare interview conducted last week in Damascus.

"We can engage in dialogue with the opposition, but we cannot engage in dialogue with terrorists," he said. The offer of talks was aired as UN chief Ban Ki-moon and his Syria envoy Lakhdar Brahimi said they were prepared to broker peace negotiations between Assad's regime and the opposition, after the two sides had proposed a dialogue.

Iranian Foreign Minister Ali Akbar Salehi said on Saturday that Assad, a close ally of Tehran, would contest a presidential election next year and it was up to the Syrian people to choose their own leader.

Syria is locked in a nearly two-year-old conflict in which the United Nations estimates that more than 70,000 people have been killed.

But Assad rejected the idea of standing down to end the bloodshed.

"If this argument is correct, then my departure will stop the fighting," he told The Sunday Times. "Clearly this is absurd, and other recent precedents in Libya, Yemen and Egypt bear witness to this."

Assad accusing London of seeking to arm the rebels ruled out any mediation role for Britain, saying: "We don't expect an arsonist to be a firefighter." British Foreign Secretary William Hague reacted to the interview by calling the Syrian leader "delusional" for failing to see that he was to blame for the carnage.

Mr Hague also said that he would this week announce more assistance to the Syrian opposition in the form of non-lethal equipment, and refused to rule out the possibility of arming them in the future.

"This is a man presiding over this slaughter," he told BBC television. "We are the people sending medical supplies to try to look after people injured and abused by the soldiers working for this man."

Asked about a reported Israeli air strike near Damascus in January, Assad said his country would retaliate. "Retaliation does not mean missile for missile or bullet for bullet. Our own way does not have to be announced," he said.

New US Secretary of State John Kerry arrived in Riyadh on Sunday for talks with the Gulf monarchies on Syria and Iran, as the six-nation Gulf Cooperation Council criticised "the international community's lack of serious and rapid action" on Syria.

GCC members Saudi Arabia and Qatar are key backers of the rebellion against Assad's regime.

On the ground in the mainly opposition-held north, opposition chief Khatib visited the towns of Menbej and Jarablos in Aleppo province, an opposition official told AFP.

"Khatib entered the country for a few hours on Sunday morning for the first time" since becoming Syrian National Coalition chief in November, the source said on condition of anonymity.

His visit focused on the Aleppo provincial election being held in the Turkish town of Gaziantep, the official said. It was held in Turkey for security reasons.

"For the first time, Aleppo will have a freely elected provincial council.

We hope the whole of Syria will have a free election soon," candidate Yehia Naanaa told AFP.

Meanwhile, the Syrian Observatory for Human Rights reported some 200 troops and rebels killed in eight days of fighting over a police academy in Khan al-Assal in Aleppo province, with insurgents seizing most of the complex.

The Britain-based group said at least 120 government troops were killed in the battle for one of the regime's last remaining bastions in the west of the province.

A police source in Aleppo confirmed that much of the academy had fallen into rebel hands.

Elsewhere, two mortar rounds hit an area near Umayyad square in the heart of Damascus, state media said, reporting only material damage.

The area houses the state television complex, the Assad Library and the army general command.

At least 183 people were killed in violence across the country on Sunday, according to an Observatory toll.

Iraq's defence ministry, meanwhile, said one of its soldiers was killed in the north after fire spilled over the border during clashes on Saturday between Syrian regime forces and rebels.