Schneider-Ammann said the talks with Moscow and its ex-Soviet customs union partners Belarus and Kazakhstan had been put on hold "in such a situation of uncertainty."
"The reason is the difficult situation over Crimea . . . we cannot of course pretend that nothing has happened," he told Swiss public radio station SRF.
"Free-trade deals are important," the minister said.
"The Russian market is important, and the customs union's market is important, but not at any price," he said.
"We have therefore decided to put the talks on hold, in order to be able to negotiate in safer circumstances in due course."
The decision marks Switzerland's first formal diplomatic move against Russia since the Kremlin's takeover of Crimea, which on Sunday voted to split from Ukraine and join Russia, in a referendum condemned by the West.
Switzerland is not a member of the European Union, which has decided to slap sanctions on Russia.
Schneider-Ammann said that the Swiss government was set to discuss the issue of sanctions over the coming weeks.
Switzerland was at the forefront of a drive to freeze funds linked to Ukrainian ex-leader Viktor Yanukovych and his inner circle.
Russia-backed Yanukovych was ousted as president in February after months of street protests, and Moscow intervened in Crimea, a mainly Russian-speaking region.
Switzerland currently chairs the Organization for Security and Cooperation in Europe, and in that capacity had on Tuesday dubbed Russia's takeover of Crimea a fundamental breach of Moscow's commitments under international law.