Iran and Middle East-based extremist groups are stepping up their activities in South America, aiming to make friends and score cash, a senior U.S. military official says.

Tehran intends to build military drones in Washington's backyard for the Venezuelan military led by Hugo Chavez, U.S. Southern Command chief Gen. Douglas Fraser told reporters Wednesday during a breakfast meeting in Washington.

Pressed by DOTMIL about the unmanned aerial vehicles' capabilities, Fraser dubbed it "a fairly limited-capacity UAV."

"I would put it in the Scan Eagle class of UAV," Fraser said. "It's not up into the Predator class."

The Southern Command chief was referring to two U.S.-made drone aircraft used by the American military. The Scan Eagle is about 10 feet long and is used for surveillance while the MQ-1B Predator drone can be armed with air-to-ground Hellfire missiles and is about 27 feet long.

Fraser said it's unclear what kinds of missions Venezuelan officials will send the Iranian drones.

His best guess? "I assume it's for internal defense."

In, 2006, Israeli officials said they shot down at least three Iran-backed Hezbollah drones during a war in Lebanon.

In December, Tehran said one of its electronic warfare units downed an American military RQ-170 spy drone, known as the "Beast of Kandahar." It remains unclear whether Iran has fitted that kind of technology on the drones sold to Venezuela.

U.S. officials do know production of the Iranian drones has been delayed due a recent fire at the manufacturing plant, Fraser said.

Teal Group analyst Phillip Finnegan says the drone deal "is one of these intangible signs of the relationship between Iran and Venezuela."

"If they can get a UAV that appears to be a cutting-edge symbol of that relationship," they can frame it as a loss for the United States, Finnegan says. "Although it's likely the end result might not be cutting-edge—generally Iran is not mentioned as being in the forefront of countries developing this capability."

Tehran also has doubled the number of official embassies it maintains across South America from five to 10. Iran also has erected "cultural centers" in some countries, Fraser said. This is part of a broader increase in diplomatic efforts on the continent, he added.

So what is Tehran up to?

"They are working to build diplomatic relations [and] international support to counter the sanctions" imposed by Washington and Europe as a means toward pressuring Iran to scuttle its nuclear arms program, Fraser said.

U.S. officials are also closely monitoring the activities in South America by two of Iran's allies, the Hamas and Hezbollah groups. The State Department has long considered both terrorist organizations.

So far, those groups have been involved in the kinds of "illicit activities," as Fraser put it, that are familiar in South America: the trafficking of drugs, weapons and people. The goal for Hamas and Hezbollah is to use these activities to generate funds to send back to their leaders in the Middle East.