Venezuela has announced the setting up of a bank with Iran to finance economic development projects in both countries. The OPEC member is also tapping Japanese funds for refinery expansion.

The bank, with equal contribution from both sides and an initial capital base of $1.2 billion, will be based in Tehran.

Tehran and Caracas, which share a common hatred for the US policies, have signed some 30 cooperation agreements in the last few months.

Venezuelan President Hugo Chavez has also met his Iranian counterpart President Mahmoud Ahmadinejad several times last year.

State-run oil company Petroleos de Venezuela SA (PDVSA) has  received financing from Japan to pay for expansions at two refineries, Rafael Ramirez, oil and energy minister of the South American country, said.

He said the company will use the funds to upgrade its El Palito and Puerto La Cruz refineries.

Venezuela, the fourth-biggest supplier of crude oil to the US, plans to raise crude oil output to 5.35 million barrels a day by 2012. The country currently produces 3.3 million barrels a day.

PVDSA had, in February 2007, received a $3.5 billion loan from a group of Japanese banks in exchange of 30,000 barrels a day of oil and refined products for the next 15 years.

Meanwhile, Venezuelan foreign minister Nicolas Maduro has asked US ambassador Patrick Duddy to explain a US Navy plane's violation of Venezuelan airspace.

Defence minister General Gustavo Rangel Briceno said Venezuela believes the intrusion was deliberate, but US authorities maintain the plane "may have strayed inadvertently into Venezuelan airspace."