Chavez warns may shut off Venezuela oil to Europe

CARACAS (Reuters) - Venezuelan President Hugo Chavez threatened on Thursday to stop selling oil to European countries if they apply a new ruling on illegal immigrants that has been condemned 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 with Paraguay's visiting president-elect to celebrate his OPEC country's oil supplies to South America.

"Any European country that applies this directive, we will -- well we won't cut off ties -- but it's simple, at the very least, our oil will not reach these countries," he said.

The socialist ally of Cuba also warned he could review the investment of European Union nations that apply the measure. He did not elaborate.

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.

In the past, 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.

Typically, Chavez, who clashes regularly with the Bush administration, threatens to stop shipping oil to the United States, even though it is by far Venezuela's biggest customer.

While he has had periodic tensions with individual European countries, Chavez generally has better relations with Europe than the United States.

Chavez has sought in recent years to diversify the country's oil customers, selling oil to Europe and, increasingly, to China.

The president also wants to lead a South American alliance to unite the continent.

Although Venezuela is not expected to be one of the countries most affected by the European measure, his tough talk supports allies such as Bolivia and Ecuador, where rich countries' anti-immigration policies are especially unpopular.

(Reporting by Frank Jack Daniel; Writing by Saul Hudson; Editing by Christian Wiessner)