Honduras' Zelaya urges U.S. to step up sanctions

TEGUCIGALPA (Reuters) - Honduras' ousted President Manuel Zelaya called on the United States Tuesday to impose tough new sanctions against the de facto government that toppled him in a coup last month.

Zelaya said he wrote to U.S. President Barack Obama and asked him to step up the pressure against Honduras' coup leaders.

The army rousted Zelaya from his bed and sent him into exile in his pyjamas in a pre-dawn raid on June 28, after accusing him of violating the constitution by trying to extend presidential term limits

Obama's administration has condemned the coup, cut $16.5 million (10.05 million pounds) in military aid and threatened to slash economic aid, but Zelaya said more was needed.

"All this has been insufficient," he said from exile in neighbouring Nicaragua, urging new measures against the individuals who ordered and carried out the coup, and have joined the interim government.

Talks mediated by Costa Rican President Oscar Arias to resolve the crisis collapsed over the weekend but he asked both sides until Wednesday to find a breakthrough.

With negotiations deadlocked and Zelaya vowing to return to Honduras within days, some Latin American leaders fear Central America's worst crisis since the end of the Cold War could flare into violence.

The U.S. government Tuesday threw its weight behind Arias' proposal which calls for Zelaya's reinstatement to set up a coalition government. It also stipulates that he abandon his bid to overhaul the constitution, which was opposed by the military, Congress and Supreme Court.

"We're in constant contact with a number of countries in the hemisphere regarding the situation in Honduras, and we believe the Arias mediation is the right way to go, and the time is now to ... resolve this issue," State Department deputy spokesman Robert A. Wood told reporters.

Zelaya said he would give Arias the 72 hours he had requested, but if no deal was reached he would return to Honduras as early as Thursday despite a standing threat from the de facto government to immediately arrest him.

He made a failed bid to return in a Venezuelan plane earlier this month. Soldiers blocked the runway and at least one protester was killed in clashes with the army.

TEST FOR OBAMA

The crisis is testing President Barack Obama as he seeks to improve U.S. relations with Latin America, where a growing bloc of leftist leaders that includes Zelaya has challenged Washington's influence in recent years.

He faces pressure from Latin American heavyweight Brazil and other countries in the region who want more pressure on Honduras' de facto government but at home some Republicans in Congress feel Obama is showing too much support to Zelaya.

Rivals of the ousted president say he was seeking to turn the traditionally conservative coffee and textile exporting nation into a satellite of Venezuela's firebrand leftist President Hugo Chavez.

Chavez has been a vocal supporter of Zelaya, putting his troops on alert soon after the coup and rallying regional support around the deposed leader, who has been touring the region and visiting Washington.

Brazilian Foreign Minister Celso Amorim called U.S. Secretary of State Hillary Clinton last week to complain that talks were dragging on too long and that Zelaya should be reinstated without conditions, a Brazilian diplomat said.

"The negotiations must not reward a coup, which could in turn encourage other coups," the diplomat said on condition of anonymity.

Zelaya's supporters hope the United States -- Honduras' No. 1 trading partner -- will ultimately force interim leader Roberto Micheletti to back down.

"We think we are close to a deal, because there is international pressure for the coup-mongers to talk," said Juan Vazquez, 35, an indigenous leader who joined around 500 Zelaya supporters in a march in the capital Tegucigalpa Tuesday.

"Zelaya will get all the support he needs from the people to get him back into the presidency," said Jose Israel Estrada, 60, as he listened to Zelaya, sporting his trademark cowboy hat, speak from Nicaragua over a dusty radio outside the ranch owned by the ousted leader in the central province of Olancho.

The Swedish European Union presidency said the bloc would continue to restrict political contacts with Micheletti's government and "consider further targeted measures."

The interim government remained defiant Tuesday, saying it has no intention of allowing Zelaya to retake power.

It also gave the staff at Venezuela's embassy 72 hours to quit the country, but they said they would refuse to leave.

(Additional reporting by Gustavo Palencia in Tegucigalpa, Ivan Castro in Managua; Sean Mattson in Lepaguare, Tim Gaynor in Washington, Juana Casas and John McPhaul in San Jose; Editing by Kieran Murray)