(Bloomberg) -- Venezuelan leader Hugo Chavez wore his trademark fatigues over a red T-shirt as he and Mahmoud Ahmadinejad of Iran grinned and cut the ribbon to inaugurate their joint lender.

The two presidents’ attendance at the 2009 ceremony in Tehran -- the Iran Venezuela Bi-National Bank officially opened its doors the following year -- was a sign of their affinity and mutual determination. Handed $200 million and set up with a board of directors from both nations, the bank was intended to fund areas from infrastructure to energy to bring the Islamic and Bolivarian republics closer.

The intervening decade has taken its toll, as Chavez’s death and Venezuela’s economic crisis saw the bank’s fortunes go into decline. A visit this week to its headquarters in a five-storey building in a commercial area of downtown Tehran found little evidence of activity. Just one customer made use of counter services and a solitary client withdrew cash from the ATM outside. Two clerks said accounts were mostly held by businesses, and suggested regular depositors would be better served at a domestic bank.

A public affairs official referred questions about the institution’s status and the extent of its ties to Venezuela to the lender’s new chief executive, who was not immediately available for comment. However, a previous managing director, Davoud Banaei, was candid about the bank’s difficulties in an interview with the state-run Islamic Republic News Agency published in late 2016.

With its original capital, “the intention was that by now that investment would reach $1 billion, but because of Venezuela’s financial problems, this objective hasn’t been reached,” Banaei said. He cited as reasons low volumes of bilateral trade, problems of transparency, currency fluctuations and Venezuela’s aversion to using hard currency. As a result, the bank was looking for other partners.

“While Venezuela is a shareholder of this bank, we prefer in the current circumstances not to carry out any work with the country as there is a possibility that our money could halve in value when it returns to us,” Banaei was quoted as saying. That explanation was echoed by another of the bank’s board members in a separate interview published in October last year.

Revolutionary Heritage

The fate of the joint lender shines a light on the state of relations between the two countries. United by a revolutionary heritage and a shared status as major oil producers, both are now subject to sanctions imposed by the Trump administration. But while some Iranians are outraged at what they see as brazen U.S. interference aimed at ending Nicolas Maduro’s presidency, some may also welcome the spotlight being, if only briefly, on Venezuela and not Iran.

With the U.S. focused on Maduro, the likelihood of targeting Iran -- possibly even militarily -- recedes, albeit for now. What’s more, the effective U.S. block on exports of Venezuelan oil to the U.S. announced this week potentially offers a boost for Iranian crude.

“For the leadership this is a good deflection from the pressure they have been receiving,” said Sanam Vakil, an associate fellow at Chatham House’s Middle East and North Africa Program in London. “It’s quite a useful crisis for Iran right now at a time when the economy is really faltering,” she said. “It doesn’t mean that they’re not anxious or don’t fear further pressure. But the breathing room is an opportunity.”

Iran’s ties with Venezuela arguably reached their zenith under Chavez and Ahmadinejad. But a lot has happened since: As Venezuela sank into crisis, Iran elected a new, more moderate president, Hassan Rouhani, and negotiated a landmark deal with world powers that offered an economic lifeline in return for commitments to curb its nuclear program. U.S. President Donald Trump’s decision last year to unilaterally withdraw from the pact and reimpose sanctions on Iran has been resisted by Europe, Russia and China.

The European Union joined the U.S. in tightening the screws on Maduro -- the bloc says it will follow Trump in recognizing National Assembly leader Juan Guaido unless Maduro calls fresh elections. But on Iran, it has defied Trump by setting up a special purpose vehicle for companies aimed at evading U.S. sanctions.

Joint Exercises

Iran’s government and military look to be doubling down on their support for Maduro regardless. Iran is preparing to take part in military exercises with Venezuela this month, according to a person in Caracas familiar with the planning. Known as Operation Angostura, the exercises will involve Nicaragua and Cuba and take place from Feb. 10-15, said the person.

Iran’s Defense Minister Brigadier General Amir Hatami attended Maduro’s inauguration last month. In a meeting with Maduro he spoke of “the victory of Venezuela’s revolutionary government” and the defeat of “a U.S. plot,” according to a report on Iran state TV.

Iran and Venezuela’s closeness has enabled the Islamic Republic to increase its commercial reach during an era of continuous U.S. pressure and international efforts to isolate its economy. A tractor plant, cement factory and a 10,000-unit housing complex are among the results.

Iran’s biggest-carmaker, the state-run Iran Khodro Company (IKCO), opened a plant in 2005 two hours drive from Caracas as part of a joint-venture with the Venezuelan government known as VenIrauto, state-run Press TV reported. Chavez was pictured driving one.

In June 2015, Iran agreed to extend a $500 million credit line to Venezuela. Maduro said at the time that economic cooperation would help Caracas in an “economic war” with the U.S.

U.S. ‘Meddling’

“Iran supports the legitimate government and people of Venezuela in the face of DC’s illegal meddling,” Foreign Ministry spokesman Bahram Qasemi told reporters on Jan. 19, IRNA reported.

Venezuelan Ambassador Carlos Antonio Alcala Cordones hosted an event in the embassy in Tehran this week at which he spoke of the countries’ “common enemy.” The event, touted as an expression of solidarity with Maduro’s regime, was attended by Iranian conservatives.

“People who belong to the reform movement, they are not really concerned too much about Venezuela” and were not present, said Foad Izadi, assistant professor of American studies at the Faculty of World Studies, University of Tehran, who did attend.

All the same, Izadi was skeptical that Iran can avoid the attention of U.S. hawks for long. People like Trump’s National Security Adviser John Bolton “are totally obsessed with Iran,” he said. “I don’t think dealing with Venezuela would be enough to take Iran off their minds.”

--With assistance from Esteban Duarte.

To contact the reporters on this story: Golnar Motevalli in Tehran at gmotevalli@bloomberg.net;Ladane Nasseri in Dubai at lnasseri@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net;Lin Noueihed at lnoueihed@bloomberg.net;Rosalind Mathieson at rmathieson3@bloomberg.net

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