TRIPOLI (Reuters) - Libya said on Friday it would withdraw $7 billion (4.1 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.
The decision followed a diplomatic row that was sparked three months ago when a son of Libyan leader Muammar Gaddafi was arrested in Geneva on July 15 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 Gaddafi last month after the plaintiffs, a Tunisian woman and a Moroccan man, 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, (Libya) has decided to stop pumping crude oil for Switzerland and withdraw Libyan assets deposited in Swiss banks which are worth $7 billion," said Libya's state JANA news agency.
"It has also decided to suspend all forms of economic cooperation with Switzerland until the reasons and the motives behind such practices are known," said the agency, quoting a statement from an unnamed Foreign Ministry source.
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."
In a further statement late on Friday, Libya's Foreign Ministry said the two countries had agreed to set up an independent committee to investigate the incident of July 15 and discover the "motives behind those practices."
Explaining the timing of Libya's latest boycott of Swiss interests, the ministry said Tripoli had decided to take some economic measures immediately and others later.
It said it had stopped offering consular services to Swiss nationals because Libyan consular workers in Switzerland had been hindered from doing their duty during the arrest of "a Libyan diplomat, his family and other Libyan nationals."
Certain actions during the arrest were a repeat of similar incidents suffered by Libyan officials and businessmen in the past, the ministry said.
Libyan fuel company Tamoil says it supplies 20 percent of the Swiss market, or 2.5 million tonnes of oil products a year, and has around 330 service stations in the country.
Swiss oil industry officials played down the impact of Libya's energy embargo, saying it was bad mainly for Tamoil and would not lead to higher prices for Swiss consumers.
"It's no threat for Swiss overall supply," said Rolf Hartl, managing director of the Swiss Oil Association.
"It would take 2-3 weeks for the interruption to physically happen. Switzerland can replace the Libyan supply in the meantime easily," said Hartl.
"This step has a political background. Libya will want to return to business as usual at some point."
(Reporting by Salah Sarrar; additional reporting by Stephanie Nebehay in Geneva and Sven-Markus Egenter in Zurich; writing by Tom Pfeiffer; editing by Tim Pearce and Ralph Gowling)
