Venezuela has declared that it is establishing a common bank with Iran to finance economic development projects in the two countries.

The bank, to be based in Tehran, will have an initial capital base of 1.2 billion dollars, with each nation providing half of the funds, AFP reported on Tuesday.

It follows up on a March 2007 agreement the two countries signed.

The relations between the two countries has elevated to an unprecedented level during President Mahmoud Ahmadinejad's term.

Last month Venezuelan President Hugo Chavez said unity and cooperation between Tehran and Caracas has gotten the 'US imperialism' riled up.

"The two countries' cooperation has turned into a great unity between the Iranian and Venezuelan nations and this annoys the US imperialism," he said.

MGH/PA