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UPDATE 2-Venezuela vote dispute risks rekindling unrest, new sanctions

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CARACAS, Oct 16 (Reuters) - Venezuela's opposition refused on Monday to recognize a surprise win for the ruling socialists in weekend regional elections, potentially rekindling protests and fresh foreign sanctions on the oil-rich country's moribund economy.

The pro-government electoral board said President Nicolas Maduro's candidates took 17 governorships, versus six for the opposition, in Sunday's nationwide poll.

The socialists' strong showing came amid devastating food shortages, triple-digit inflation, and a collapsing currency in the South American OPEC nation.

Polls suggested the opposition would easily win a majority.

Dismayed opposition leaders decried irregularities, called for street action on Monday, and demanded a full audit, but they did not offer any evidence of fraud.

"Neither Venezuelans nor the world will swallow this fiction," said grave-faced opposition campaign chief Gerardo Blyde at a midnight news conference.

"We played by the rules with a democratic conscience ... but this electoral system is not trustworthy."

Critics called for the electoral board to release more detailed results, to cross-reference with opposition observers' tallies. (http://www.cne.gob.ve/resultadostregionales2017/)

Dispirited about their chances of removing Maduro through protests or the ballot box, many Venezuelan opposition supporters now hope foreign pressure, such as sanctions, will hurt him.

The Trump administration has already imposed sanctions on Venezuelan officials, including Maduro.

In August, Washington imposed financial sanctions against Caracas in an effort to cut back funds for the already severely cash-strapped government.

The European Union could also take measures against Maduro, a former bus driver and foreign minister narrowly elected to replace the late leader Hugo Chavez in 2013.

At home it seems unlikely opposition supporters are willing to return to the streets after four months of grueling protests this year failed to pressure the government into holding an early presidential election, freeing jailed activists or accepting humanitarian aid.

At least 125 people died, while thousands were injured and arrested in violence that brought parts of Venezuela to a standstill as hooded youths battled security forces.

Sunday's disputed result will further crush protesters' hopes that the unpopular Maduro can be removed in next year's presidential election, possibly worsening disputes over strategy in the perennially divided coalition.

Venezuelan bond prices inched down on Monday morning in a possible sign of investor pessimism.

"There's no money, no food, no medicine, no security. Yet according to the government, everyone voted for them?" said a skeptical Gloria Torres, 56, once a staunch supporter of former President Hugo Chavez.

The opposition's electoral setback could further speed a flow of emigrants to other Latin American countries, Spain, and the United States, as many Venezuelans now fear the long-running political crisis will drag on for years.

'WHEN THEY LOSE, THEY CRY FRAUD'

Flanked by his powerful wife, soldiers, and red-shirted party members, a buoyant Maduro appeared on state television late Sunday to celebrate victory and paint the opposition as sore losers.

"When they lose they cry fraud. When they win they shout 'Down with Maduro,"' said Maduro, 54, ordering a full audit to demonstrate transparency.

The opposition pocketed governorships including in the turbulent Andean states of Merida and Tachira, the oil-producing region of Zulia, and the jungle-and-savannah state of Bolivar.

The government, which had controlled 20 of the 23 governorships, took states across Venezuela's languid plains and steamy Caribbean coast.

It won back populous Miranda state, which includes part of capital Caracas, with an up-and-coming star of the Socialist Party, Hector Rodriguez.

It also won in Barinas, Chavez' home state in Venezuela's agricultural belt that government supporters regard as the 'cradle of the revolution.'

"If the electoral council does not give clear numbers demonstrating this election was legitimate, it could further international isolation of Venezuela," said David Smilde, a long-time Caracas-based sociologist.

"If the results are not convincing, this will make a presidential election in 2018 difficult," he said, referring to opposition hopes to take power in the presidential vote scheduled for late next year.

The opposition has cried fraud at some past votes, but has lacked substantial detailed evidence.

After a controversial vote in July for a pro-government legislative superbody, Reuters obtained a document showing irregularities in the reported results. Smartmatic, the U.K.-based company that provided the technology for the vote, said the results had been manipulated by at least 1 million ballots.

Authorities denied any wrongdoing.

The government does retain significant support in poorer, rural settings and Venezuela's disorganized and elite-led opposition has struggled to capitalize on discontent over the economy.

Socialist candidates, invoking the popular Chavez at every rally, urged Venezuelans to vote against the opposition, whom they accuse of plotting a coup under the veneer of peaceful protest.

"I vote because I want peace, not terrorism," said customs official Franquelsi Anciana, who cast a vote for the government candidate in the western city of Maracaibo. (Additional reporting by Andrew Cawthorne, Deisy Buitrago, Diego Ore, Andreina Aponte, Corina Pons, Girish Gupta in Caracas and Isaac Urrutia in Maracaibo; Writing by Alexandra Ulmer and Girish Gupta; Editing by Andrew Cawthorne and Jeffrey Benkoe)