Venezuela's Chavez ends Colombia fuel subsidy

* Chavez angered by Colombia's plan to host more US troops

* Up to 120,000 barrels of subsidized fuel sold a month

CARACAS Aug 9 (Reuters) - Venezuelan President Hugo Chavez on Sunday ended a subsidy on fuel sold to the OPEC nation's neighbor Colombia in a growing diplomatic spat over plans to host more U.S. troops there.

Persistent Washington critic Chavez is furious at a plan to house a few hundred more U.S. troops at seven Colombian military bases and says it risks sparking war in South America.

Colombian President Alvaro Uribe says the troop plan is necessary to fight drug traffickers but Chavez claims a greater U.S. presence in the region is a direct threat to him.

"Stop the supply of (subsidized) fuel to Colombia right now, let them buy it at its real price. How can we favor the government of Uribe like this?"

Under a 2008 agreement, Venezuela sells between 50,000 and 120,000 barrels of subsidized gasoline each month to Colombia to combat rampant fuel smuggling.

Chavez has already taken measures against Colombia's state oil company and car exporters, and on Sunday urged companies to buy less from one of Venezuela's top trade partners. He previously warned the fuel deal was under review.

The two countries shared $7 billion in commerce last year, with Venezuela exporting oil and chemical products in exchange for food and textiles.

Venezuela has some of the world's cheapest gasoline, which costs just a few U.S. cents to fill a large tank and makes contraband sales to more costly Colombia big business.

The OPEC nation says it loses 27,000 barrels per day and $1 billion per year to traffickers ranging from small-time peddlers to large-scale smuggling.

Chavez withdrew his ambassador from Bogota for about a week in the diplomatic spat but late on Friday night ordered him back.

Chavez joins other South American leaders on Monday for a summit in Ecuador, where the base plan is expected to top the agenda. U.S. ally Uribe is not attending, but toured the region to drum up support.

Colombia, the world's No. 1 cocaine producer, has received more than $5 billion in mostly military aid from Washington to fight drug traffickers and FARC rebels. The base deal is an extension of an existing military cooperation accord.

U.S. President Barack Obama on Friday denied the United States is planning to set up military bases in Colombia as part of the upgraded security agreement and said he has no intention of sending large numbers of additional troops.

The United States is in talks with Uribe's government about relocating U.S. drug interdiction flight operations to Colombia after being kicked out of neighboring Ecuador.

The plan is expected to increase the number of U.S. troops in Colombia above the current total of less than 300 but not above 800, the maximum permitted under the existing military pact, officials said.

(Reporting by Enrique Pretel, Writing by Frank Jack Daniel, Editing by Eric Beech)