US sanctions Chavez aides in growing crisis

The United States escalated a major diplomatic crisis with Venezuela on Friday, imposing sanctions on aides to President Hugo Chavez in retaliation for his expulsion of the U.S. ambassador. The crisis and Chavez's threat to cut off oil shipments to the United States sent debt tumbling in the OPEC nation and plunged relations between the superpower and one of its top energy suppliers to their lowest point in years. Washington was also preparing to eject Venezuela's top diplomat in the United States, a U.S. official said, although Chavez tried to pre-empt that move by telling him to pack his bags and go home on Thursday. Venezuela has some of the largest oil reserves outside the Middle East and despite Chavez's clashes with the Bush administration, he has maintained oil supplies and never before expelled a U.S. ambassador. Chavez said Thursday's move was made in support of his leftist South American ally President Evo Morales of Bolivia, where violent anti-government protests have killed eight people. Bolivia and the United States have expelled their respective ambassadors too this week after Morales accused Washington of supporting the opposition. Venezuelan bond yield spreads over U.S. Treasuries -- widely seen as a gauge of investor risk perception -- soared 41 basis points to 765 basis points on Friday. Rising spreads are associated with more investor risk perception. Chavez said he would not restore relations with the United States at least until his stated foe U.S. President George W. Bush leaves the White House in January.