President Chavez has been accused of sympathising with the rebels

He says business dealings with Bogota will be frozen until it has apologised for the kidnap of a Marxist guerrilla chief from Venezuelan soil last month.

Colombia admits paying bounty hunters to help seize the rebel, but denies its agents violated Venezuelan sovereignty.

Oil-producing Venezuela is Colombia's second-largest export market.

Pipeline frozen

President Chavez told parliament on Friday he had "ordered all agreements and business with Colombia to be paralysed" following the seizure of Rodrigo Granda, a commander commonly described as the "foreign minister" of Colombia's largest left-wing rebel group Farc (Revolutionary Armed Forces of Colombia).

He did not spell out whether that meant a cessation of all trade ties between the two countries, or just business ties between the two governments.

However, efforts at building a $200m natural gas pipeline between the two countries would be suspended, President Chavez said.

The two countries agreed last year to start work on the pipeline, which will eventually allow Venezuelan fuel access to the Pacific coast and to markets in Asia and the western US.

Seizure defended

On Thursday, Venezuela withdrew its ambassador from Bogota - a gesture not reciprocated by Colombia.

Phone records had suggested Mr Granda was snatched in Caracas

Colombian Vice-President Francisco Santos said on Friday that relations with Venezuela remained "very good".

He also defended the operation that led to the capture of Mr Granda, who appeared in Colombian custody in December after disappearing from the Venezuelan capital, Caracas.

Colombia initially denied claims it had abducted him from foreign soil, but later admitted paying bounty hunters to secure his capture.

Venezuela says Colombian agents operating inside its territory orchestrated Mr Granda's kidnapping.

It has arrested several of its army officers, accusing them of colluding with the Colombians.

"From any point of view, it is unjustifiable that high-ranking Colombian officials are bribing Venezuelan authorities," Mr Chavez said on Friday.

He urged Bogota to admit it made a serious mistake.

Colombian security officials have repeatedly alleged that Mr Chavez' administration is partial to the Farc rebels.