Half-price bus and tram passes for Londoners on income support are to be financed by an oil deal with a Latin American socialist state.

Ken Livingstone, the Mayor of London, signed a deal with a Venezuelan oil company yesterday for cheap fuel for the capital’s 8,000 buses. In return, his officials will advise on street cleaning and other services.

Mr Livingstone said that he would use the discount, worth £16 million a year, to give 250,000 people Oyster smart-cards allowing half-price journeys from July.

The real value of the deal for the Mayor is the symbolic link it establishes with the regime of Hugo Chávez, Venezuela’s socialist president and arch-critic of US foreign policy. Mr Chávez, who is a pin-up for supporters of left-wing radical groups around the world, this month described George Bush as a war criminal, and likened him to Adolf Hitler.

Economists and opposition parties questioned why a country where 38 per cent of the population lives in poverty should be giving aid to one of the world’s richest cities.

Tony Travers, director of the London research centre at the London School of Economics, said: “It seems very odd for London to accept aid from a relatively poor country. This seems to be part of Ken’s continuing infatuation with Latin American leftists, which is a hangover from the idolisation of Castro in the 1960s and 1970s.

“This is classic Livingstone political showmanship: it’s designed to irritate his opponents and at the same time persuade his rainbow coalition of supporters that he’s still really one of them.”

Mr Livingstone gave very few details about the deal with the oil firm Petroleos de Venezuela Europa, but claimed that it meant a 20 per cent cut in the price of fuel for buses.

He said that the idea had first been raised by Mr Chávez during a visit to London last year.

He claimed that sending selected officials on secondment to Venezuela would save the country millions of dollars. The officials, who will each spend a few weeks in Venezuela, will offer advice on recycling, waste management, traffic and carbon emissions.

Nicolas Maduro, Minister of the Popular Power for Foreign Affairs in Venezuela, said: “This agreement will strengthen relations between the peoples of London and Venezuela and is a win-win strategy.”

Alejandro Granado, of the oil company, said: “Venezuela is very rich in resources while London has great expertise in successfully managing the infrastructure services that characterise a modern city.

“It is therefore very fitting that this cooperative initiative focuses on these two areas.”

Richard Barnes, the deputy leader of the London Assembly Conservatives, said: “Ken has struck a dubious oil deal, the finer detail of which is unknown because of the secrecy surrounding it. London should not be doing business with third-rate South American dictators with an appalling human rights and democratic record.”

Mr Barnes added: “It’s absurd, and not very green, to send officials on all-expenses-paid trips halfway round the world when they are needed to solve London’s problems.”

Cuba has a similar deal with Mr Chávez under which it receives about 100,000 barrels of cut-price oil a day and sends doctors to Venezuela in return.

Mr Livingstone wanted to sign the deal in November on a trip to Cuba and Venezuela that cost London council taxpayers £41,000. He called off the Caracas leg of the trip because Mr Chávez was too busy with his reelection campaign to meet him.

Rich and poor

38%: Percentage of Venezuela’s population that lives below the poverty line

5th: Venezuela’s ranking among oil-exporting countries

£3,500: GDP per capita in Venezuela, compared with £14,000 in London

8.9%: unemployment level in Venezuela, compared with a figure of 7.6 per cent in London

£4: Approximate price of a gallon of unleaded petrol in Britain

6p: Approximate price of a gallon of petrol in Venezuela

Sources: Eurostat; Unicef; CIA factbook; ONS; Department for Communities & Local Government; UN

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