Anwar Ibrahim told a press conference that the freeze would stay forever, 'unless the Sunday Times withdraws the article'.
John Major yesterday hit out at Malaysia's decision not to award new contracts to British companies. He said its behaviour was not justified and accused it of short- sightedness, adding that it owed much of its economic development to British trade and investment.
The Prime Minister, asked if he would consider retaliation against Malaysia, told BBC Radio 4's Today programme: 'I don't believe that what the Malaysian government has done to British companies is remotely justified.'
He said the fact that Malaysia was 'within striking distance' of achieving its ambition to become an industrialised country over the next two decades or so was due 'not least' to British companies' investment and trade.
'I believe it is short sighted to have acted as they have done, and I believe that over time they may be seen to have damaged the Malaysian interest as much as the British,' he added.
Mr Anwar emphasised the Malaysian government's commitment to last week's decision. But he stressed that it only applied to public-sector contracts - educational programmes and purely private-sector deals were not affected.
Articles in the British press since the embargo was announced claiming that Malaysia puts critical journalists in prison, that Dr Mahathir was racist and motivated by revenge because Britain once refused him a place to study law, had only inflamed the situation, he said.
Mr Anwar said he expected no retaliation from Britain. He added that the government was disappointed Mr Major had not done enough to clarify the Pergau dam affair. He said as far as Malayasia was concerned, aid for the dam was not linked to purchases of arms.
This contradicts the British government's admission that the aid was originally linked to arms and the view of those close to the negotiations who remember the Malaysians constantly referring to the two subjects in the same breath.
The Deputy Prime Minister confirmed that Rupert Murdoch, publisher of the Sunday Times, was the focus of the ban. Dr Mahathir has voiced his serious concern at Mr Murdoch's purchase last autumn of Star TV, the Hongkong-based satellite station that beams across Asia. 'This is how Mr Murdoch chose to respond,' claimed Mr Anwar.
He maintained that the construction contract in the Sunday Times article for which Dr Mahathir is supposed to have taken a bribe was non-existent. 'The article could not be defended,' he said. Dr Mahathir, he added, had better things to do than sue a newspaper in London.
Earlier, Dr Mahathir told reporters that Malaysia had no quarrel with Britain 'but with press freedom in that country'. He stated that British aid was aimed at helping British companies secure contracts and not at assisting Malaysia.
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