CARACAS (Reuters) -- Venezuela said Wednesday it would grant oil exploration
                  concessions in a large disputed border area that is currently part of Guyana,
                  raising the stakes in a bitter war of words with its eastern neighbor.

                  Venezuela has angrily denounced plans by Guyana to set up a commercial rocket
                  launch site, operated by a U.S. company, in the unpopulated Essequibo region,
                  an area the size of Florida subject to a long-standing territorial dispute.

                  Foreign Minister Jose Vicente Rangel told a television interviewer that his
                  government "will grant oil concessions in the area which is not delimited," in
                  reference to Essequibo, a 61,500-square-mile (159,000-sq-km) mineral-rich area
                  of tropical jungle that covers 75 percent of Guyana's territory.

                  "We've warned oil companies that have accepted concessions there from Guyana
                  that we would take measures," the minister added, without giving details.

                  No official comment on his remarks was immediately available in Guyana, a
                  former British colony on the northeastern shoulder of South America, which
                  rejects Venezuela's claims on Essequibo as historically unfounded.

                  However, a Guyanese government source said Venezuela's increasingly strident
                  recriminations sounded like political maneuvering ahead of Sunday's general
                  elections in which President Hugo Chavez is seeking reelection.

                  "The feeling is that Venezuelans are upping the elections rhetoric," the source
                  said in Guyana's capital of Georgetown.

                  Venezuelan ambassador to Guyana, Hector Azocar, told Reuters that his
                  government had expressed its concern with Exxon Mobil, the No.1 U.S. oil
                  company, about an offshore concession granted by Guyana in the Orinoco delta.

                  However, the Guyanese source said "there is no immediate cause for concern for
                  Guyana and companies that have concessions offshore" in the Essequibo.

                  The Venezuelan claim, probably the last major territorial dispute in the Americas,
                  is rooted in 19th century colonial history but was revived in 1999 by Chavez.

                  The Venezuelan leader, a tough-talking nationalist, reiterated on Tuesday that his
                  government would not "tolerate" the construction of the rocket-launch site.

                  He has argued the site could be used for military purposes, a claim that Guyana
                  dismissed, saying it would be a commercial facility and its security private.

                  However, the Venezuelan Foreign Ministry stressed in a statement issued
                  Wednesday after Rangel's comments that Caracas would never use force to
                  recover the Essequibo, saying "an armed conflict with Guyana would be
                  irresponsible and stupid."

                  Dallas-based Beal Aerospace Technologies Inc. signed a deal with Guyana in
                  May to build the launch facility for commercial satellites and plans to invest $100
                  million in the site.

                  The company chose the location because of Essequibo's sparse population and
                  proximity to the equator, which allows rockets to send heavier payloads into
                  space.

                  The dispute was thought to have been resolved in 1899, when an international
                  Tribunal of Arbitration set the boundary between the two countries at a Paris
                  conference.

                  The disagreement resurfaced in 1949 after the death of a U.S. lawyer who
                  represented Venezuela at the talks. He said in a letter opened posthumously that
                  the settlement was void because it was the result of a secret deal between
                  Britain, then the colonial power in Guyana, and Russia.

                  Venezuela formally raised questions about the validity of the 1899 accord at the
                  United Nations in 1962, four years before Guyana won independence from
                  Britain. The world body named a mediator in the dispute in 1989.