By Frank Jack Daniel and Arshad Mohammed
CARACAS/WASHINGTON (Reuters) - The United States imposedsanctions on aides to Venezuelan President Hugo Chavez onFriday in retaliation for his expulsion of the U.S. ambassador,escalating a crisis that raises the spectre of a possible oilsupply cutoff.
The diplomatic moves and Chavez's threat to cut off oilshipments to the United States sent the OPEC nation's debtprices tumbling and plunged relations between the superpowerand one of its top energy suppliers to their lowest point inyears.
Chavez warned on Thursday that if he stops selling oil tothe United States, world crude prices would immediately doubleto above $200 a barrel.
The socialist leader leads a growing bloc of left-wingleaders in Latin America and has diversified Venezuela's oilcustomers in recent years, particularly increasing supply toChina.
He said his decision to expel the U.S. ambassador onThursday in an expletive-laden tirade against "Yankees," wasmade to support Bolivia's leftist president who is facingviolent protests against his government that he blames oninterference by Washington.
Washington struck back on Friday with sanctions against twoChavez aides, including Venezuela's former Interior MinisterRamon Rodriguez, for allegedly aiding Marxist guerrillas inColombia.
It is also possible Chavez knew sanctions were comingagainst his officials and wanted to take the offensive.Rodriguez resigned unexpectedly last week, and Chavez oftenuses a strategy that his best form of defence is attack when heis assailed.
Washington was also preparing on Friday to ejectVenezuela's top diplomat in the United States, a U.S. officialsaid, although Chavez tried to preempt that move by telling himto pack his bags and come home a day earlier.
NEW TENSIONS
Venezuela has some of the largest oil reserves outside theMiddle East and despite Chavez's frequent clashes with the U.S.government, he has maintained oil supplies and never beforeexpelled a U.S. ambassador.
Violent anti-government protests have killed eight peoplein Bolivia, ruled by Chavez's close ally, President EvoMorales.
Bolivia and the United States expelled their respectiveambassadors earlier this week after Morales accused Washingtonof supporting the opposition.
Venezuelan bond yield spreads over U.S. Treasures -- widelyseen as a gauge of investor risk perception -- soared 41 basispoints to 765 basis points on Friday.
Chavez said he would not restore normal relations with theUnited States at least until U.S. President George W. Bushleaves the White House in January.
"When there is a new government in the United States, wewill send a new ambassador, a government that respects thepeople of Latin American," he said.
Lehman Brothers' Gianfranco Bertozzi, who analyses howpolitical risk in Venezuela affects the country's debt prices,told investors the market was over-reacting because there hadbeen no concrete oil-related measures.
"This expulsion is really only until the nextadministration, the election for which is 53 days away, and inthe meantime oil is still flowing - although markets seemsagitated by the risk of escalation," he wrote from New York.
Chavez was briefly ousted in a 2002 coup that was initiallywelcomed by Washington. Even after the coup, Chavez did not goso far as to expel the U.S. ambassador.
But tensions between the United States and Venezuela areescalating quickly. Chavez allowed two Russian long-rangebombers to land in Venezuela this week and released evidence ofan alleged plot to kill him that he says was supported byWashington.
He also reduced U.S. commercial airline flights toVenezuela and warned he would support "armed movements" to backBolivia's Morales in the event of a coup against him.
Chavez calls the United States an evil empire and hasaligned with Russia. Moscow is sending warships for joint navalexercises with Venezuela's military in the Caribbean inNovember, reviving tensions not seen in the region since theend of the Cold War.
(Editing by Saul Hudson and Kieran Murray)
