Military sales to Venezuela are relatively small, comprising mainly spare parts for warplanes, the U.S. action signaled Monday further deterioration in U.S. relations with Venezuela. Still, Chavez shrugged it off and said he did not plan to retaliate.

State Department spokesman Sean McCormack said Monday the United States was worried about Venezuela's close relations with Iran and Cuba, both of which are on the department's list of state sponsors of terror.

"If you have a reasonable or rational expectation that somehow information that you share with them might make its way to just the groups that you're trying to combat, that's certainly negative," McCormack said.

He said the United States is also concerned about Venezuela's ties with two leftist guerrilla groups in Colombia: the Revolutionary Armed Forces of Colombia, or FARC, and the National Liberation Army, or ELN. Both have been designated foreign terrorist organizations by the United States.

Chavez, on a visit to London, dismissed the U.S. move as irrelevant. "This doesn't matter to us at all," he told The Associated Press. He pledged efforts to find a solution to the problem.

Labeling the United States an "irrational empire," Chavez said it has a "great capacity to do harm to the countries of the world." Chavez previously has called President George W. Bush a terrorist and has accused the United States of plotting to overthrow him.

Earlier, at a London news conference, Chavez rejected U.S. claims that Iran's nuclear program is aimed at producing a nuclear bomb. "I don't believe that the United States or anyone else has the right ... to prohibit that a country have nuclear energy," he said.

The arms sale ban affects U.S. sales and licensing for the export of defense articles and services to Venezuela, including the transfer of defense items, said Darla Jordan, a State Department spokeswoman.

State Department figures show Venezuelan purchases of U.S. defense equipment in 2005 came to $33.9 million (euro26.4 million), of which $30.5 million (euro23.8 million) was for C-130 cargo plane spare parts. It was not clear whether such purchases will be barred under the new rules.

The State Department has expressed concern in the past about what it contends is an arms buildup by Venezuela, including the purchase of 100,000 rifles from Russia.

The department took note Monday of Venezuela's "multibillion-dollar arms acquisition program."

As far as U.S. sales are concerned, John Pike, director of the Virginia-based defense think tank globalsecurity.org, said the primary impact would be the cutoff of spare parts for the country's U.S.-made aircraft, which include F-5 Freedom Fighters, F-16 Falcons, cargo planes and helicopters.

Venezuela's air force has 277 aircraft, of which 177 are U.S.-made. Significant numbers of U.S.-made aircraft are in Venezuela's army and navy, too, Pike said.

Venezuela has accused the United States of pursuing a double standard on terrorism. It points to the U.S. refusal to extradite Luis Posada Carriles, who is wanted in Venezuela for the 1976 bombing of a Cuban passenger plane.

Posada, an anti-Castro Cuban, has denied involvement in the bombing, which killed 73 people. He has been detained for the past year in Texas for illegally entering the country.

Thomas Shannon, who heads the State Department's Latin America bureau, said the administration had concluded that it could not tell Congress that Venezuela was cooperating in counterterror activities in any meaningful way.

"This was a step we took with great reluctance," Shannon said in response to a question during an appearance at George Washington University.

He also noted that the administration already had "decertified" Venezuela for lack of cooperation in combating drug trafficking. "We are now at the same point concerning terrorism," Shannon said.

Antoine Halff, an oil analyst at Fimat USA in New York, said it was too soon to determine how the oil market would react, though he anticipated a possible short-term increase in oil prices. He added that the United States has ample supplies at the moment, and any potential retaliatory action by Venezuela would be tempered by the fact that global demand appears to be weakening.

Indeed, crude-oil futures declined more than 3 percent Monday, falling below $70 (euro54.58) a barrel, amid signs that high prices were slowing consumption in the United States.