Swiss caution on Libya travel due Gaddafi row

* Swiss respond to Libyan refusal to free Swiss citizens

* Row started with arrest of Gaddafi's son in 2008

ZURICH, Oct 26 (Reuters) - Switzerland advised its citizens on Monday not to travel to Libya after the North African country failed to free two Swiss businessmen held there since last year.

The Swiss foreign ministry said in a travel advisory published on its website that political tension which started after the arrest of the son of Libyan leader Muammar Gaddafi in Geneva last year was continuing.

"The Libyan authorities are reacting with measures against Swiss persons and firms in Libya, for example the arrest of Swiss citizens and the obstruction of business," it said.

The ministry advised against all travel to Libya, adding that the risk of kidnapping was very high due to armed gangs and Islamist militants who operated in large parts of the Sahara.

The Swiss say Gaddafi promised to free the businessmen after meeting Swiss President Hans-Rudolf Merz on the sidelines of the U.N. General Assembly in New York last month. [ID:nLO120274]

The two men are Max Goeldi, head of the Tripoli unit of the Swiss-Swedish electrical engineering conglomerate ABB (ABBN.VX), and a construction firm employee identified as Rachid Hamdani in Swiss media.

They have been prevented from leaving Libya since July 2008, days after Swiss police arrested Hannibal Gaddafi on charges, later dropped, of beating and mistreating two domestic employees while staying in Geneva.

ABB said on Friday it had not heard from Goeldi for five weeks and did not know where he was. ABB called on the Swiss and Libyan governments to resolve the situation swiftly.

After Hannibal Gaddafi and his pregnant wife Aline were arrested in a Geneva hotel, Libya cut oil supplies to Switzerland and withdrew more than $5 billion in assets from Swiss banks.

The Geneva prosecutor dropped the case last year when the plaintiffs withdrew their formal complaint after reaching an undisclosed settlement with the Gaddafis.

(Reporting by Emma Thomasson; editing by Michael Roddy)