Iranian President Mahmoud Ahmadinejad made a visit to Armenia on Friday that saw the Islamic republic and its small Christian neighbour sign a series of agreements to boost ties.
A joint statement by Ahmadinejad and his Armenian counterpart Serzh Sarkisian said that the two politically isolated countries planned to step up cooperation.
"The presidents expressed their determination to develop a friendly and mutually beneficial bilateral relationship," said the statement issued by Sarkisian's office.
Ex-Soviet Armenia has been seeking to increase links with Iran because it is suffering from long-term political disputes with two of its other neighbours, Turkey and Azerbaijan, which have led to an economic blockade and closed borders.
The two states have found further common ground because Iran also has a tense relationship with Armenia's enemy Azerbaijan, which fought a war with Yerevan in the 1990s over the disputed territory of Nagorny Karabakh.
Tehran's relationship with Baku is complicated by its huge ethnic Azerbaijani minority and Azerbaijan's close diplomatic and economic links with the United States.
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Ahmadinejad and Sarkisian's statement also noted Yerevan's support for Tehran in the row over its controversial nuclear programme which the West suspects of being an attempt to build atomic weapons but Iran says is for peaceful energy generation.
"(The two presidents) noted the right of all countries, including Armenia and Iran, to use nuclear energy for peaceful purposes," the statement said.
The relationship between Tehran and Yerevan is developing because both states are isolated by political disputes, said Sergey Minasian, an analyst at the Caucasus Media Institute.
"For Armenia, which is under blockade by Azerbaijan and Turkey, Iran is a way out to the world. And for Iran, Armenia is a country through which it's possible to go out to the West," Minasian said.
The joint statement said that six agreements were signed during Ahmadinejad's visit including an energy cooperation deal and a memorandum about Iranian development assistance to Armenia.
A timetable was also agreed for the joint construction of a hydro-electric power station on the Arax river which runs along their mutual border.
Trade turnover between Tehran and Yerevan has been increasing, from $206 million (157 million euros) in 2009 to $273 million (209 million euros) last year -- a significant boost for impoverished Armenia's economy.