By Greg Morsbach
BBC News, Caracas
Sweden's biggest defence manufacturer, the Saab Group, says it will no longer provide weapons to Venezuela.
President Chavez has been buying arms from Russia
Saab says it cannot continue sales of anti-aircraft and anti-tank devices to Venezuela because of a US arms embargo against President Chavez's government.
Saab subsidiary Bofors has supplied Venezuela's armed forces for 20 years.
Under the terms of the American restrictions, no factory in the world may sell weapons to Venezuela that contain components made in the US.
Bofors will cut its commercial ties to Venezuela on 1 October, complying with the strict embargo put in place by Washington back in May.
The Swedes have in the past sold anti-aircraft missiles, rocket launchers and anti-tank rifles to Venezuela worth around $150m (£80m).
There are no new arms contracts in the pipeline at the moment. But President Chavez will soon need to replenish his stocks of ammunition and missiles.
The US embassy in Sweden said it was pleased Saab was complying with American legislation that prohibited the sale of arms to countries which did not comply fully with US anti-terrorism efforts.
The authorities here in Caracas said they were surprised by the news.
"We haven't been notified officially by Bofors but we're taking this matter very seriously," Defence Minister Raul Isaias Baduel said in a BBC interview.
"I can assure you we'll be looking into this and I'll be formulating a response together with President Hugo Chavez."
A member of the military high command told the BBC they were studying the possibility of signing arms deals with Switzerland.
He said it was a shame the door to Sweden had been closed but he was sure that others would open soon.
Caracas has recently been purchasing arms from alternative sources, such as Russia, where none of the weapons contain American components.