U.S. and Venezuela escalate crisis

By Frank Jack Daniel and Arshad Mohammed

CARACAS/WASHINGTON (Reuters) - The United States on Friday imposed sanctions on Venezuelan officials it accused of helping Colombian rebels smuggle drugs, deepening a diplomatic crisis that raised the spectre of an oil supply cutoff.

The U.S. Treasury Department said Venezuela's top two intelligence chiefs and a recently retired interior minister had assisted Marxist guerrillas fighting the U.S.-backed Colombian government to traffic in cocaine and guns.

The United States banned U.S. citizens from having dealings with the officials and froze any U.S. assets they may own.

The sanctions were announced in Washington a day after Venezuelan President Hugo Chavez threatened to stop crude sales to the United States and expelled the U.S. ambassador, plunging relations to the lowest point in years.

Chavez acted after his ally Bolivian President Evo Morales threw out the U.S. ambassador, accusing him of stirring up protests against the leftist government.

Chavez, who calls Cuba's Fidel Castro a mentor and sees Russia as a counterbalance to U.S. power, had warned on Thursday that world crude prices would immediately double to above $200 a barrel if he cuts oil to the United States.

The clash was part of a long-brewing conflict between the United States and Latin America's bloc of left-wing leaders antagonistic to traditional U.S. dominance in the region.

Tensions were already high after Chavez allowed two Russian long-range bombers to land in Venezuela and took Moscow's side in disputes over Georgia and U.S. plans for a missile shield in eastern Europe.