JAKARTA (Reuters) - Soccer's world governing body FIFA is considering sanctions against Indonesia after stripping the country of its hosting rights for the Under-20 World Cup, Indonesia's football federation chief (PSSI) Erick Thohir said on Friday.

FIFA removed Indonesia's hosting rights over what a PSSI official said was a failure to honour its commitments to the tournament, following outrage among some politicians in the predominantly Muslim nation about Israel's participation.

FIFA took the action after PSSI said it had cancelled the draw for the tournament because the governor of Bali refused to host Israel's team.

The removal caused anger and dismay among fans and players in the soccer-mad Southeast Asian country.

Erick told a news conference the toughest sanctions FIFA might bring in included barring Indonesia from competing at the highest level of the sport internationally.

"I am working hard to negotiate again with FIFA so that sanctions can be avoided," he said.

Indonesian President Joko Widodo did not want the country "ostracised" from global soccer and had ordered PSSI to transform the sport in the country after losing the hosting rights, Erick said.

FIFA declined to comment.

(Reporting by Stanley Widianto and Ananda Teresia; Editing by Ed Davies)