Libya has told Italy it would no longer help protect Italian shores from waves of illegal African migrants because Rome and other EU states had failed to come up with promised support.
The move was announced shortly after Silvio Berlusconi took an oath to serve as Prime Minister - his third time leading Italy's government - and heralded potentially stormy relations between diplomatic and economic allies Rome and Tripoli.
Italy is Opec member Libya's main European trade partner and Italian oil company ENI holds stakes in pipeline, natural gas and oil projects in Libya.
"Libya has been suffering in the struggle of warding off the flow of illegal migrants to Italy by depleting its material resources and spending huge amounts of money to protect Italian coasts from waves of illegal migrants," the Interior Ministry said in a statement faxed to Reuters.
"Libya is no longer responsible for protecting Italian coasts from illegal migrants .... because the Italian side did not make good on its commitment to provide support for Libya."
Libya watchers said the timing of the unprecedented statement from Tripoli was deliberate because Mr Berlusconi ignored Libya's warning against appointing a far-right lawmaker to a Cabinet post.
A Libyan charity group, chaired by Libyan leader Muammar Gaddafi, had warned of "catastrophic repercussions" for ties between the two countries if Roberto Calderoli became a minister. Anti-Islamic actions by Mr Calderoli have triggered rioting in Libya.
A member of the Northern League party within previous Mr Berlusconi's coalition, he angered Muslims in 2006 by wearing a T-shirt emblazoned with cartoons of the Prophet Mohammad that prompted deadly riots in Libya. The politician further outraged Italy's Muslim community last year by promoting a "pig day" protest where he threatened to walk a pet pig in an area reserved for a new mosque.
The Gaddafi International Foundation - which made a similar warning on bilateral ties when the riots erupted in 2006 - is headed by Mr Gaddafi's son Saif al-Islam, widely thought to play a major role in Libya's diplomacy with Western states.
Libya's Interior Ministry said it expected an increase in the number of illegal migrants from sub-Saharan countries to cross to Italy via Libya this summer - usually a peak season for migrants because Mediterranean waters are calm.