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A threat by Venezuelan President Hugo Chavez to suspend oil exports to the United States, amid a dispute with Venezuela's neighbor and US ally Colombia, would be "economic suicide," analysts say.

Chavez broke off diplomatic relations with Colombia last Thursday over allegations that 1,500 Colombian guerrillas were operating from within Venezuela.

The firebrand leader on Sunday warned that if Colombia were to launch an attack "promoted by the Yankee empire, we would suspend oil deliveries to the United States, even if everybody over here has to eat stones."

Importing 950,000 barrels of oil a day, the United States is the main oil consumer of Venezuela, which is a member of the Organization of Petroleum Exporting Countries (OPEC) and South America's largest oil producer and exporter.

"To suspend oil sales to the United States, the only client which pays all its bills, would be economic suicide, particularly taking into account a long recession ... and the highest inflation in the region," economist Orlando Ochoa told AFP.

The United States, which had called Chavez's decision to cut diplomatic ties "a petulant response," on Monday ruled out military action against Venezuela and urged both sides to use dialogue and diplomacy to resolve their dispute.

"The United States has long enjoyed a mutually beneficial energy relationship with Venezuela, and we wish to see that relationship continue," Virginia Staab, a State Department spokeswoman, told AFP.

Venezuelan economist Jesus Cacique told AFP that Chavez was unlikely to carry out his threat to cut off US oil, and that if he did it would not last long.

"In three months we'd be in a precarious situation ... there wouldn't be foreign currency for business or industry and inflation would shoot up even more," Cacique said.

Venezuela, where currency markets are strictly controlled, has been in a recession since 2009, when the economy shrunk 3.3 percent.

It also has the region's highest inflation, reaching 16.3 percent at the end of the first half of 2010, after hitting 25.1 percent at the end of 2009.

Ochoa said that Chavez's threat was likely to remain rhetorical and that it was likely a bid to "include the United States in the problem with Colombia to justify the economic failure of his government."

The row has revived simmering tensions between Colombia, the biggest US military ally in the region, and Venezuela, a friend of Cuba that has used its oil wealth to accumulate an arsenal of modern Russian warplanes and weaponry.

Last year, Chavez already froze ties with Colombia after Bogota agreed to give the US military access to seven of its bases to fight cocaine production and trafficking -- activities in which Colombian rebels are deeply involved.

But analysts said he could not afford to cut off US oil.

If oil prices follow April's trends, Venezuela would lose between 10.5 and 11 billion dollars for the rest of the year if stopped US exports, Cacique said.

"The country doesn't have another market where it can send its oil as easily as to the United States," he added.

Venezuela produces 3.1 million barrels of crude per day, according to official figures. OPEC puts the figure at 2.32 million barrels per day.

Story from AFP
AFP 07/26/2010

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