U.S.: Bolivia's expulsion of envoy was "grave error"

WASHINGTON (Reuters) - Bolivia's decision to expel U.S. Ambassador Philip Goldberg was a "grave error," the State Department said on Thursday, adding that U.S. aid to the South American country was under review.

"President (Evo) Morales' action is a grave error that has seriously damaged the bilateral relationship," State Department spokesman Sean McCormack said. He said Morales' accusations that Goldberg had instigated protests against Bolivia's government were "baseless."

"We're taking a look at all aspects of the bilateral relationship," McCormack told reporters, adding that the United States would have more to say in the coming days and weeks about the repercussions of Bolivia's "unwarranted action."

The United States is the largest single-country provider of development assistance to Bolivia, he said. The United States is also Bolivia's largest export market, and is the major provider of counter-narcotics assistance, he said.

Morales, a close ally of Venezuela's fiery leftist leader Hugo Chavez, ordered Goldberg out of the country on Wednesday, accusing him of siding with Morales' rightists opponents in a power struggle gripping Bolivia.

McCormack said the Bolivian foreign minister informed Goldberg of Morales' decision at a meeting on Wednesday. He said he expected Goldberg to leave the South American country soon.

"We regret that President Morales has chosen this course. It will prejudice the interests of both countries, undermine the ongoing fight against drug trafficking and will have serious regional implications," McCormack told reporters.

He said Morales' move against Goldberg followed Bolivia's failure on Tuesday to address security threats to U.S. counter-narcotics operations in the Chapare region. Those threats had caused the withdrawal of U.S. Drug Enforcement Administration personnel, McCormack added.

(Reporting by Susan Cornwell, editing by David Alexander)