Iranian President Mahmoud Ahmadinejad and his Venezuelan counterpart, Hugo Chavez, have launched construction of a joint petrochemical plant in Iran.
The plant will cost some $700m and take four years to complete, with a second one scheduled to be built in Venezuela.
This is the Venezuelan leader's third visit to Iran in two years.
In a defiance of Western powers Venezuela is a strong supporter of Iran's nuclear programme, and the two nations are both major oil exporters.
"Iran and Venezuela - the axis of unity," read the official posters at the site of the plant in Assalouyeh on the Gulf coast.
Mr Chavez and Mr Ahmadinejad marked the official start of building by instructing the drivers of two mechanical diggers to start working, Reuters news agency reported.
The plant will be a facility to produce methanol - an alcohol which can be used as a solvent or an element in fuel.
Mr Chavez's visit comes as Iran faces the threat of toughened sanctions from the United Nations over its refusal to freeze uranium enrichment.
The US and the European Union accuse Iran of enriching uranium as part of a nuclear weapons programme, but the Iranians say its activities are for peaceful energy production.
Mr Chavez has been a vocal defender of Iran's right to have a nuclear programme.
Co-operation between Venezuela and Iran has been growing in the last couple of years.
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