Libya "has decided to stop crude oil shipments to Switzerland and withdraw Libyan assets from Swiss banks, which amount to seven billion dollars," JANA said overnight.

The Libyan newsagency quoted an unidentified foreign ministry official as saying said Tripoli will "also put an end to all economic cooperation with Switzerland" in protest at the "poor treatment of Libyan diplomats and businessmen by the canton of Geneva."

Swiss President Pascal Couchepin said Libya's decision will not threaten the economy.

"The current situation on the oil markets is not tense, prices show that there is sufficient oil on the market. So there's no danger for Switzerland," he told Swiss German-language television.

Even if the economy is not threatened by the measures, "it is never okay when a country with which we are trying to maintain friendly relations takes measures against Switzerland," he said.

Libya supplies about 2.5 million tonnes of crude to Switzerland a year, about 20 percent of the country's total needs.

Libya first threatened to halt oil deliveries when Kadhafi's son Hannibal was arrested in Switzerland in July along with his wife Aline after two servants claimed they had abused them.

The threat was not carried out and Swiss prosecutors closed the case last month after the two servants, a Tunisian woman and a Moroccan man who received compensation from the couple, dropped assault charges.

The Swiss foreign ministry said in a statement that "it would continue its efforts to resolve the problems" between the two countries. Meetings between high-ranking diplomats between the two countries have been taking place.

The official news agency said the Libyan decision would be revoked once the reasons for the treatment of the diplomats and businessmen have been explained.

Tripoli wants a formal apology from Bern and has stopped two Swiss nationals from leaving the country in retaliation for Hannibal Kadhafi's arrest.

It has already restricted air links, stopped issuing visas to Swiss nationals, shut the Tripoli offices of major Swiss companies ABB and Nestle, and detained the two Swiss nationals -- who were subsequently released.

Libyan oil company Tamoil said on Wednesday that the government had decided to halt oil deliveries to Switzerland.

"It is a decision of Libya and not Tamoil," Tamoil CEO Issam Zanati told AFP in a telephone interview.

Libya supplies about 2.5 million tonnes of crude to Switzerland a year, about 20 percent of the country's total needs.

Zanati was unable to say how long the suspension would last or why the decision was taken.

A halt in Libyan deliveries would not affect supplies or prices in Switzerland as distributors would have ample time to find other suppliers, the head of the country's oil companies association, Rolf Hartl, has told the Swiss news agency ATS.

Hannibal Kadhafi, the fifth eldest son of the Libyan leader, has a chequered past dogged by run-ins with the police across Europe and allegations of violence and drink driving.

In 2005, France gave him a four-month suspended sentence and ordered him to pay a 500-euro fine for bodily harm against his pregnant partner, now wife, and illegal possession of a firearm.

A year earlier, he was arrested after speeding through red lights on the Champs Elysees in his Porsche. Some media reports said he had been drinking and was driving on the wrong side of the posh Paris avenue.

© 2008 Agence France-Presse