PRESIDENT George W Bush is a “jerk”. His administration is a “mafia of assassins”. And, according to Hugo Chavez, the belligerent populist president of Venezuela, Condoleezza Rice, the US secretary of state, lies in bed at night dreaming of him.

Chavez, 50, is rapidly becoming a US nightmare in Latin America. He aroused further American anger last week by threatening to form a nuclear alliance with Iran. The prospect of two hostile, oil-rich governments working together against US interests has shocked Washington and plunged relations with Venezuela to a dangerous new low.

US officials have begun to suspect that Chavez is plotting to become the “new Castro” — the leading voice in the region of leftist anti-Americanism.

Behind the disintegrating relationship between Washington and one of its most important oil suppliers lies Chavez’s apparent conviction that US agents were behind an attempted coup that briefly ousted him in 2002.

Storming back to power after a referendum last August, Chavez has clashed with US officials over a series of issues that prompted Rice to label him “a negative force in the region”.

In his latest challenge Chavez declared that Venezuela needed nuclear energy to prepare for when its oil ran out. He said that other Latin American countries should collaborate. “We want to initiate nuclear research and ask for help from countries like Iran,” he said.

While US officials have dismissed some of Chavez’s threats as bluster, intelligence sources are concerned about claims that he has given alleged terrorists Venezuelan passports.

Venezuelan officials dismiss Washington’s complaints as offensive and undemocratic. “The US is a very ideologically oriented administration and has a lot of animosity towards us,” said Andres Izarra, minister of information. “But we can ally ourselves with whomever we want.”

Washington has attempted to isolate Chavez by wooing his Latin American neighbours but when Donald Rumsfeld, the US defence secretary, raised concerns about Chavez during a tour of the region, President Luiz Inacio Lula da Silva of Brazil remarked a few days later: “We don’t accept defamation and insinuations against a compañero (friend).”

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