UPDATE 4-Chavez may stop oil to Europe over immigrant law

(Adds companies, trader comment, byline)

By Frank Jack Daniel

CARACAS, June 19 (Reuters) - Venezuelan President Hugo Chavez on Thursday threatened to stop selling oil to European countries if they apply a new ruling on illegal immigrants that is criticized in Latin America and by human rights groups.

European Union lawmakers ruled on Wednesday that illegal immigrants can be detained for up to 18 months and face a reentry ban of up to five years.

"We can't just stand by with our arms crossed," Chavez said at an event to celebrate his OPEC country's oil supplies to South America attended by Paraguay's visiting president-elect, who also criticized the law.

Millions of Latin Americans live in Europe, many from poor Andean countries and war-weary Colombia.

For centuries colonized by European nations, after independence Latin America also received waves of European immigrants escaping the major wars and economic crises of the 20th century.

"Venezuelan oil will not go to the countries that apply this shameful directive. I'll say it now, Venezuelan oil will not go," Chavez said.

The socialist ally of Cuba also threatened to expel investments made by such countries, warning he would draw up a list of their business in the OPEC member nation.

"We are ready to do this now," he said. "Here in Venezuela at least, they won't be missed."

Chavez has already nationalized several foreign companies in Venezuela, turning them into joint ventures controlled by the state. France's Total (TOTF.PA) and Norway's Statoil (STL.OL) are among the European companies operating in Venezuela.

He called on other leaders in the region to take action against the law. Millions of Latin Americans live in Europe, many from poor Andean countries and war-weary Colombia.

PRICE HAWK

Chavez has regularly issued conditional threats to halt crude shipments from Venezuela -- one of the world's largest exporters of oil -- although he has never followed through on a move that would hurt supplies at a time of record prices.

Such threats from Chavez, a price hawk, have sometimes caused world oil values to rise.

On Thursday, U.S. crude closed nearly $5 a barrel lower after China announced hikes in fuel prices that could dampen demand in the growing energy guzzler.