US Threatens to Block £890m Spanish Arms Sale to Venezuela

The US yesterday threatened to block a record-breaking arms deal under which Spain would sell ships and aircraft to Venezuela, in another sign of increasingly fraught relations between the Bush administration and the Venezuelan president, Hugo Chávez.

The US claimed that a €1.3bn (£890m) arms deal with Mr Chávez, who is a vocal supporter of Cuba's Fidel Castro and a fierce critic of the Bush administration, could destabilise the region. The deal, due to be signed in Caracas on Monday, includes four coastal patrol ships, four corvettes, 10 C-295 transport planes and two maritime surveillance planes. It would be a massive boost to Spain's ailing shipyard industry and to the rest of its defence industry.

In a further irritant to fractious US-Venezuelan relations, officials from the South American country signed a deal to ship 12m gallons of home heating oil to low-income Americans in Massachusetts, part of a plan by Mr Chávez to embarrass the Bush administration in the wake of its lacklustre response to Hurricane Katrina. The fuel will be sold at about 40% below market prices to thousands of homes during the winter.

Spain's Socialist prime minister, José Luis Rodríguez Zapatero, gave the arms deal his personal backing earlier this year, saying it was "of benefit to the people" and would help Venezuela to fight drug-trafficking. But Washington has signalled that as some of the military hardware being sold contains US technology, it may prevent the sales.

"Those air or naval platforms include US technology," the American ambassador to Madrid, Eduardo Aguirre, said yesterday. "We have not yet decided whether to grant our permission for obtaining that technology." He made clear that Washington did not want the deal to proceed. "We hope, in the end, that the transaction will not be carried out," he said. "We're worried that the sale could be a destabilising factor in the region."

The US defence secretary, Donald Rumsfeld, is also on record as saying that Spain is making a mistake over the sale to Venezuela. The US components in the Spanish aircraft reportedly amount to half or more of those planes. News reports say the planes' manufacturers could use EU or Israeli technology, but it is more costly.

The deal is being closely watched in the arms industry, as the US has shown itself increasingly willing to block sales between its allies and third countries.

Mr Chávez, a former paratroop colonel, has accused the Bush administration of seeking to overthrow his socialist government. He has pledged "revolutionary" measures to overcome poverty and has railed against oil industry "oligarchs" and multinationals.

Under the cheap oil deal, a subsidiary of Venezuela's state-owned oil company will supply oil at 40% below market prices at a time when Americans are braced for for high winter heating bills. The fuel will be distributed by two non-profit organisations, Citizens Energy Corp and the Massachusetts Energy Consumers Alliance, which will means-test consumers.

A Democratic congressman, William Delahunt, who helped to broker the fuel deal in a meeting with Mr Chávez in Caracas in August, rejected criticism that the move was politically motivated. He described the agreement as "an expression of humanitarianism at its very best".

"This is a gesture about people," Mr Delahunt told reporters after a ceremony outside the house of the intended recipients. This is going to alleviate the fears of people who were wondering whether they were going to be able to get through our bitter New England winter."