But the Venezuelan president brushed aside the ban on Monday, saying "this doesn't matter to us at all".

The sanctions escalate a crisis with the major US oil supplier and come after years of antagonism between the two nations on issues ranging from trade to energy prices that have dragged ties to their worst state in decades.

Despite Venezuela's repeated assertions that it works against terrorism, and particularly militants in the Andean region, the United States designated it on Monday as a country considered unco-operative in the US "war on terrorism".

While the move is not as severe as adding a country to the US blacklist of state sponsors of terrorism, which includes Iran and Cuba, it does trigger sanctions.

The sanctions extend the Bush administration's practice in recent years of stopping country-to-country sales involving American arms and technology to Venezuela.

Now Washington also prohibits all US commercial weapons sales to Venezuela and prevents any re-selling of American arms and technology from other nations.

Eroding ties

The top US diplomat for Latin America said the Bush administration took the step with "enormous reluctance", but noted the countries' traditionally strong ties had eroded under Chavez.

That deterioration has weighed on world oil markets in recent years, adding to supply worries that have helped cause record high crude prices.

"We have big friends in the world who are willing to help us to defend our country against imperialism. Down with imperialism"

Hugo Chavez,
Venezuelan president

Governing over the largest oil reserves outside of the Middle East, Chavez has periodically threatened to stop oil exports to Venezuela's biggest market, the United States, but the Opec member has remained a reliable supplier.

Larry Birns of the Council on Hemispheric Affairs think-tank in Washington said the move was a powerful symbol of US disdain for Chavez but would have little practical impact on a country that has turned increasingly to arms suppliers such as Russia.

"This is a political act. The State Department has been looking to up the ante without provoking a full-blown meltdown," he said. "It is an escalation of US hostility toward Venezuela."

Chavez unfazed

Chavez, speaking in London where he is on a visit, said: "It's the empire and it has a great capacity to do harm to the countries of the world."

But he said his government would not respond with punitive measures of its own, saying "we will never use oil as a political weapon against a people", adding that "we will find a solution to this".

The Venezuelan president said he was not worried by the ban.

"We have big friends in the world who are willing to help us to defend our country against imperialism. Down with imperialism."

He added that his country had put up with American pressure over the past seven years, and was capable of withstanding more.