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Eight killed in Bolivia clashes, US tensions rise

(Adds Chavez expelling U.S. ambassador, Brazil reaction)

SANTA CRUZ, Bolivia, Sept 11 (Reuters) - At least eight people were killed as violent anti-government protests flared in Bolivia on Thursday, creating havoc in the natural gas industry and raising tensions with the United States.

Opposition activists shot dead seven peasant farmers in the remote Amazon region of Pando, a government official said, describing the incident as a massacre. An employee of the opposition-led regional government was also killed.

"We're talking about a real massacre and the person responsible is the Pando governor," said Deputy Minister of Social Movements Sacha Llorenti.

President Evo Morales' leftist government blames the unrest on rightist governors who control four of the poor country's nine regions.

The opposition demands greater autonomy and energy revenue and opposes plans by Morales, a former coca farmer and Bolivia's first indigenous president, to rewrite the constitution and distribute land to the poor.

Washington ordered out the Bolivian ambassador on Thursday a day after Morales, a close ally of Venezuela's fiery leftist leader Hugo Chavez, expelled U.S. Ambassador Philip Goldberg.

Morales accused Goldberg of fanning the protests.

State Department spokesman Sean McCormack said in a statement that Washington "officially informed the government of Bolivia of our decision to declare Ambassador Gustavo Guzman persona non grata."

FEAR OF COUP

Chavez said he was expelling the U.S. ambassador from his oil-rich country in a show of support for Morales.

"The yankee ambassador in Caracas has got 72 hours to get out of Venezuela, in solidarity with Bolivia," he shouted at a political rally. He vowed earlier to come to the Bolivian president's aid if there was a coup.

In a sign of regional concern about the escalating chaos, Brazil's more moderate leftist government said it would not accept any attempt to overthrow Morales.

"We won't tolerate a rupture in the constitutional order of Bolivia," Marco Aurelio Garcia, foreign policy advisor to President Luiz Inacio Lula da Silva told reporters.

Bolivian Finance Minister Luis Arce said the army was sending more troops to natural gas fields and border crossings with Brazil after protesters vandalized pipelines and stormed a pumping station, cutting natural gas imports to Argentina and temporarily halving exports to Brazil.

Bolivia is the poorest country in South America and its economy is heavily dependent on natural gas. Brazil is Bolivia's biggest foreign investor and half of its natural gas needs are met by Bolivian imports.

Clashes also erupted in Tarija, a region rich in natural gas, and anti-Morales demonstrators occupied public buildings in the eastern city of Santa Cruz, an opposition stronghold, for a third day.

American Airlines canceled flights to Santa Cruz, and Bolivia's Erbol radio said gunfire wounded five people after a militia-style anti-Morales youth group stormed a market in a pro-Morales neighborhood in the city.

Troops were withdrawn from downtown Santa Cruz after several soldiers were beaten up in front of TV cameras earlier this week. The government response has been restrained.

However, Bolivia's ambassador to Brazil, Rene Dorfler, said the government was considering imposing martial law.

"We've been asked for patience, prudence, and we're going to hang in there. But patience also has a limit," Morales said in a speech in La Paz, adding that large landholders who oppose his land reforms were financing the opposition.

Since taking office, Morales has channeled more state revenues and given more power to his Indian power base in western Bolivia, accentuating a rift with the mixed race population of the east.

Additional reporting by Carlos Quiroga in La Paz, Susan Cornwell in Washington, Natuza Nery in Brasilia and Enrique Andres Pretel in Caracas; Editing by Helen Popper and Sandra Maler

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