TRIPOLI -- Libya on Sunday announced a break in diplomatic relations with Iraq and the closure of its embassy in Baghdad following the U.S. raid on the Palestinian mission in the Iraqi capital, AFP reported.

"Libya has decided to cut diplomatic relations with Iraq, to close its embassy in Baghdad and recall all its personnel," the Foreign Ministry said in a statement.

It said the decision was taken due to "the practices of the American and British occupation forces against diplomatic missions in Baghdad and the announcement that their diplomatic immunity had lapsed".

The U.S.-led coalition is responsible for the safe return of the Libyan diplomats and the protection of their embassy, it stressed.

The break in ties "will have no bearing on the relations between the two peoples, Iraqi and Libyan", the ministry said, adding that relations would be restored "once Iraq recovers its freedom, independence and sovereignty".

The U.S. State Department said Thursday that foreign diplomats in Iraq no longer enjoy diplomatic immunity or any of the privileges they were accorded under their accreditation to Saddam Hussein's former regime.

In addition, spokesman Richard Boucher said Washington is advising foreign countries to hold off on sending envoys to Baghdad until a new Iraqi government is in place as "at this point there is really no purpose" for them to be there.

U.S. forces in Iraq ransacked the Palestinian mission in Baghdad overnight Tuesday, arresting at least eight people, including seven Palestinians and a Syrian, the top military commander said.

The commander, Lieutenant General David McKiernan, could not say if any of them were diplomats. But a spokesman for the Palestinian mission said that three of them were accredited to the Iraqi Foreign Ministry.