Libya will withdraw $7 billion of assets in Swiss banks, cut economic ties with Switzerland and stop supplying it with oil to protest against poor treatment of Libyan diplomats and businessmen, Libyan news agency Jana said.

The decision follows a diplomatic row that broke out three months ago when a son of Libyan leader Muammar Gaddafi was arrested in Geneva and charged with mistreating two domestic employees.

Hannibal Gaddafi denied the charges and was freed on bail, but the case caused uproar in Tripoli and led to the detention of two Swiss nationals, who were later released. Geneva's chief prosecutor dropped the case against Mr Gaddafi last month after the plaintiffs, a Tunisian woman and Moroccan man employed by Mr Gaddafi, withdrew their formal complaint. It was unclear which events prompted Libya's latest move.

"Due to the poor treatment a number of Libyan diplomats and businessmen received from the police in the canton of Geneva, the Great Jamahiriyah (Libya) has decided to stop pumping crude oil for Switzerland and withdraw Libyan assets deposited in Swiss banks which are worth $7 billion," Jana cited an unnamed foreign ministry source as saying in a statement yesterday.

"It has also decided to suspend all forms of economic cooperation with Switzerland until the reasons and the motives behind such practices are known," it added, without elaborating.

Swiss President Pascal Couchepin said he was not too worried although Switzerland wanted to have good relations with Tripoli.

"I hope this is more about words than actions. But you never know," he told Swiss TV programme SF1.

"The situation on the oil market is not very tense at the moment. The prices indicate that there is enough oil on the market. Therefore I think there is no danger for Switzerland."