Spanish Defence Minister Jose Bono on Monday defended the $2 billion deal on Monday, which will deliver 12 transport aircraft and eight military patrol boats to Venezuela, saying that no international embargo prohibited the transaction.

In an allusion to US pressure, Bono said at a signing ceremony that Spain was a "sovereign and autonomous country" that abided by international law and that "there was no greater empire than the law".

The US, which has accused Venezuela's President Hugo Chavez of destabilising the region, had lobbied Spain to drop the deal and tired to block the signing.

Chavez praised Spain for defying what he called US hegemony.

"By confronting the hegemonic and imperialist ambitions of the elite that now governs the United States, Europe's dignified attitude can offer great help to the world," Chavez said at the ceremony which was broadcast on state television.

Patrol boats

The agreement involved a contract with the Spanish firm Casa-EADS to provide a dozen C-295 transport planes and a contract with the shipbuilding company Navantia to provide military patrol boats that Caracas says are needed to combat drug smuggling.

"A transport plane cannot be identified a fighter plane, nor as a bomber"

Spanish Defence Minister Jose Bono

Chavez has accused the US of trying to topple him, castigated free-trade policies promoted by Washington and has condemned the US-led war in Iraq as an "imperialist" adventure.

During the ceremony, Chavez charged the US had "lied to the world" to justify the war in Iraq that had claimed the lives of "innocent children".

Spain's defence minister said the cargo aircraft were for peaceful purposes and that his government had not sold weaponry such as tanks, missiles or fighter jets.

"A transport plane cannot be identified a fighter plane, nor as a bomber," Bono said.

The sale had fulfilled European Union and Nato regulations, he said.

The arms deal had been brokered during a visit to Venezuela by Spanish Prime Minister Jose Luis Rodriguez Zapatero last March.

Russia has also rejected US protests of its arms sales to Venezuela while Israel recently bowed to US pressure and backed away from the proposed sale of fighter aircraft to Caracas.