Should this implied threat be taken seriously it could spell further increases in oil prices in an already jumpy market. It could also fuel speculation that the US will taken action to remove Chavez from power in the coming months....
The U.S. Embassy in Madrid announced that the United States had denied permission for the sale of planes, citing concerns about a Venezuelan government that it said had "grown progressively more autocratic and antidemocratic."
"What is this if not evidence of the horrific imperialism that the government in Washington wants to impose on the world?" Chavez said, reading news of the U.S. action as he addressed the assembly on the state of the nation.
"I denounce once again before the world the imperialist attack by the U.S. government against the Venezuelan people and the Venezuelan government," he said.
In Washington, State Department spokesman Sean McCormack said the United States concluded the proposed transfers were not consistent with the country's interests.
"We're concerned that this proposed sale of military equipment and components to Venezuela could contribute to destabilization in Latin America and have made that view clear to the Spanish, Venezuelan and other governments in Latin America," McCormack said.
U.S. law authorizes the government to prevent a country from transferring military equipment purchased in the United States to a third country.
The acquisition by Venezuela of certain types of military equipment, McCormack said, would raise "a lot of questions about their potential use and what effect that may have on the stability in the region."
Chavez called the U.S. concerns ridiculous, saying "these are transport planes."
Spain said Friday it did not share the U.S. concerns and would go ahead with the deal, removing the U.S.-made components and replacing them with parts made elsewhere.
Spain agreed in November to sell Venezuela the planes and eight patrol boats for $2 billion, despite U.S. threats at the time to oppose the transfer. It would be Spain's largest-ever defense deal, involving 10 C-295 transport planes and two CN-235 patrol planes, as well as four ocean patrol boats and four coast patrol vessels.
Officials have said neither the boats nor the transport planes were armed and that the patrol planes were equipped only for self-defense. But McCormack said Friday that the U.S. was rejecting the entire sale, including the boats.
The U.S. government has also expressed concern about Russia's planned sale of helicopters and 100,000 Kalashnikov rifles to Venezuela starting early this year. But Russia has said it too is going ahead with the deals.
Chavez called the U.S. action part of a campaign to smear his government.
"A new attack against Venezuela is just beginning," Chavez said. "Mr. Danger will crash up against the force of the truth and the force of morality," Chavez added, in a reference to President Bush.
Chavez, who says he is leading a socialist revolution for the poor, is up for re-election in December. He remains popular amid high oil prices that have funded his social programs and helped bring economic growth of 9.4 percent last year.
Chavez has accused the United States of plotting to overthrow him and warned that any invasion would be defeated. Washington has strongly denied they have any such plans, although there are plenty of rumors to suggest that it might be on the cards. Chavez says that Venezuela must be prepared.
Venezuela is the world's 5th largest oil exporter and their biggest customer is the United States.
Chavez said, "Every day we send them 1.5 million barrels of oil - what would happen if tomorrow I were to say that no ship leaves for the United States?"
"How high would the price of a barrel go? I think it could hit $100," he threatened. "I don't want to do it, but war is war!"
[NOTE: Conflicts over oil can be found at the root of almost every war in the 20th century and this century looks set to be worse still. The USA with just 5% of the world population is using 25% of the worlds oil production but demand from the rest of the world is increasing rapidly also. Global production is close to the highest it will ever be and is set to decrease. When it does, the oil wars of the last century will be eclipsed by a bitter worldwide struggle over the remains scraps. Want to find out more about the implications of peak oil? The rampART social centre in east London will be hosting a grassroot conference on peak oil next month. If you would like to attend or help organise the event, email rampart AT mutualaid DOT org.]