Russian President Vladimir Putin and his Iranian counterpart Ebrahim Raisi on Wednesday oversaw, via video link, the signing of a deal to finance and build an Iranian railway line as part of an embryonic international North-South Transport Corridor.
The Rasht-Astara railway is seen as an important link in the corridor, intended to connect India, Iran, Russia, Azerbaijan and other countries via railways and sea - a route that Russia says can rival the Suez Canal as a major global trade route.
"The unique North-South transport artery, of which the Rasht-Astara railway will become a part, will help to significantly diversify global traffic flows," Putin said.
He also said the 162 km (100 miles) railway along the Caspian Sea coast would help to connect Russian ports on the Baltic Sea with Iranian ports in the Indian Ocean and the Gulf.
"Without a doubt, this agreement is an important and strategic step in the direction of cooperation between Tehran and Moscow," Raisi said.
Russia and Iran have been pushed to strengthen their political and economic ties by Western economic sanctions on each, which both say are unjustified.
Since the 1979 Islamic Revolution that swept U.S.-backed Shah Mohammad Reza Pahlavi from power, Iran has been ostracised by the West and its economy, crippled by a myriad of sanctions. It holds around a quarter of the Middle East's oil reserves.
The West also imposed another set of restrictions, over Iran's nuclear program, while Russia was sanctioned due to its actions in Ukraine.