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 raised the spectre of an oil supplycutoff.
The sanctions and Chavez's threat to stop crude sales tothe United States plunged ties between the superpower and oneof its top energy suppliers to the lowest point in years.
Chavez, who calls Cuba's Fidel Castro a mentor and seesRussia as a counterbalance to U.S. power, had warned onThursday that world crude prices would immediately double toabove $200 a barrel if he cuts oil to the United States.
The clash was part of a long-brewing conflict between theUnited States and Latin America's bloc of left-wing leadersantagonistic to traditional U.S. dominance in the region.
Tensions were already high after Chavez allowed two Russianlong-range bombers to land in Venezuela and took Moscow's sidein disputes over Georgia and U.S. plans for a missile shield ineastern Europe.
This week's crisis began when Bolivia expelled its U.S.ambassador, accusing him of fuelling protests against leftistPresident Evo Morales, a close ally of Chavez.
In an expletive-laden tirade against "Yankees," Chavezejected the U.S. ambassador to Venezuela on Thursday andHonduras weighed in on Friday, blocking a U.S. envoy fromimmediately taking up his post as ambassador.
INTERNAL CHALLENGES
State Department spokesman Sean McCormack denied the UnitedStates had done anything wrong in the countries and said: "Thisreflects the weakness and desperation of these leaders as theyface internal challenges."
Washington said on Friday it was expelling the Venezuelanambassador and imposed sanctions on Chavez aides, includingVenezuela's ex-Interior Minister Ramon Rodriguez, for allegedlyaiding rebels in Colombia.
It is unclear whether Chavez knew in advance that U.S.sanctions were coming against his officials, but Rodriguezresigned unexpectedly last weekend. The Venezuelan leader, anex-soldier trained in a tank division, often uses a strategythat his best form of defence is attack.
Chavez was briefly ousted in a 2002 coup initially welcomedby Washington. Even at that time, Chavez did not go so far asto expel the U.S. ambassador and has been a reliable oilsupplier.
U.S. Ambassador Patrick Duddy has kept a comparatively lowprofile in Caracas but the Bush administration has needledChavez over issues from drugs cooperation to airline safety.
This year, laptops found by Colombia in a rebel camp wereseized on by Washington as evidence of cooperation betweenVenezuelan officials such as Rodriguez and Colombian rebels.
Despite his popularity among the majority poor, Chavezfears losing seats in regional elections in November because ofthe poor performance of many of his local officials.
Chavez may hope the diplomatic crisis along with charges hemade on Thursday of a plot to kill him will fire up his supportbase at the start of the election campaign.
Chavez said he would not restore normal ties before U.S.President George W. Bush leaves the White House in January.
On Friday, Venezuela's debt bonds lost value -- a gauge ofinvestor risk perception.
(Editing by Saul Hudson and David Storey)
