As China enters Iran's housing market, regime-linked entities look to profit

By Babak Dashti

An Iranian builder works in a multi-storey building in Tehran's wealthy northern neighbourhood. [Behrouz Mehri/AFP]

An Iranian builder works in a multi-storey building in Tehran's wealthy northern neighbourhood. [Behrouz Mehri/AFP]

Speculation is rampant inside Iran over the details and ramifications of the Iranian regime's housing construction deal with China.

After a long period of denial, the regime was forced to acknowledge that Chinese companies were given the green light to invest in the country's mass housing market.

Eqbal Shakeri, who serves on the parliamentary (Majles) civil committee, in October announced that the Ministry of Roads and Urban Development had entered into negotiations with the Chinese to develop housing projects under the new "Housing Production Leap Law".

This move comes at a time when President Ebrahim Raisi's government has promised to build one million housing units each year to address the slump in the housing sector.

High rise buildings are seen here in Iran. Chinese companies are actively pursuing housing projects in Iran. [Mehr News Agency]

High rise buildings are seen here in Iran. Chinese companies are actively pursuing housing projects in Iran. [Mehr News Agency]

It also comes months after Iran signed a 25-year "strategic co-operation pact" with China, an agreement that many critics see as the regime "selling Iran".

Regime-linked media outlets then began spinning the alleged benefits of the Chinese housing agreement, painting the Chinese government as "a miracle worker" and saying "it could finish the work quickly and save the government money in affordable housing projects".

Under the agreement, which has not been officially detailed, China will provide the investment money to build a number of inexpensive apartment buildings and will afterwards take the profits from the future sales of the units.

After facing some domestic criticism for the apparent deal, the regime said China would not build the homes but would provide only investment and technology.

'Nothing but corruption'

Three institutions that are directly managed by Iranian leader Ali Khamenei's office will be carrying out the construction work, according to Shakeri.

These are the Housing Foundation of the Islamic Revolution, the Executive Headquarters of the Imam's Directive, and the Foundation for the Oppressed (Mostazafan Foundation).

"These three institutions, particularly the Islamic Revolutionary Guard Corps (IRGC), have long clung on to lucrative economic resources," said Iran-based political observer Ehsan Kalati.

The significant profits this plan is expected to reap will line the pockets of bulk producers, including the collective institutions under Khamenei, as well as China.

Kalati pointed to the essential contradiction of China's presence in the Iranian housing sector, and considered its only motive to be profitability through the IRGC and the leadership collective.

The purpose of inviting China to participate in the Iranian construction sector would be to "win China's heart through enabling its further co-operation with the Iranian government", he said.

He said this is happening while Iran is in many ways beholden to China, and Beijing is slowly taking over the different sectors of Tehran's economy, mostly through the all-encompassing 25-year agreement between the two countries.

Deepening worries

China's deepening links with Iran are creating worries inside Iran and in the wider region.

A major worry focuses on the broader strategic co-operation between the two countries, including joint weapons development, military exercises, and intelligence sharing.

From Beijing's perspective, "the point of the deal is for China to gain a foothold in Iran, particularly on the islands of Jask and Kish in the Persian Gulf", said a former Iranian navy analyst who spoke on condition of anonymity, in reference to the 25-year deal.

Enhanced Chinese military co-operation with Iran, resulting from the deal, "is a foregone conclusion", he said.

With this deal, a weakened, globally isolated and cornered Iranian regime -- teetering on the brink of economic collapse -- will be at the mercy of an emboldened and assertive Chinese regime.

Many observers fear Beijing will use one of its main instruments of coercion -- debt, by offering unaffordable loans to and imposing burdensome contracts on vulnerable countries -- to demand even more concessions from Iran, possibly even military ones.

Beijing has already constructed a series of ports along the Indian Ocean, creating a necklace of refuelling and resupply stations from the South China Sea to the Suez Canal, and with the deal, focus will now shift to the Iranian ports of Jask and Chabahar.

Ostensibly commercial in nature, the ports would allow China's rapidly growing navy to expand its reach.

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