Iran is negotiating with Chinese and Turkish companies to build affordable government housing as part of a potential oil swap deal, an official said on Saturday.
Iranian President Ebrahim Raisi (Raeesi) has promised to build a million homes each year during his four-year term in order to solve rising housing costs for ordinary Iranians, weighed down by high inflation and a deepening economic crisis.
Ahmad Donyamali, a member of the state housing council, told the Iranian Employment News Agency (ILNA) that the government was in talks with Chinese, Turkish and even a European company to contract out some of the construction and pay for it in oil.
In October there was news of Chinese companies participating in the construction project, however it was quickly denied at the time.
Tehran faces two obstacles when it comes to signing contracts with foreign companies. The first hurdle is paying for goods and services amid a US bank sanction that threatens foreign banks with third-party sanctions if they do business with Iran. The second problem is the lack of foreign exchange.
The US oil sanctions have significantly reduced Iran’s dollar revenues since 2018, forcing the country to top up its foreign exchange reserves, which observers say will decline significantly in three years, although they may have rebounded marginally this year.
An oil swap deal could work especially for Chinese companies that are already importing Iranian oil under the radar of US sanctions.
However, the promise to build 4 million homes in 4 years in an economic crisis might be more of a wish for Iran than a sane project.
Nuclear talks with the US, which could help lift the sanctions, are currently stalled and the outlook for the Iranian economy is bleak. The national currency, which has increased tenfold in four years, could fall to unprecedented lows if the sanctions continue for another year.
The US has threatened to tighten sanctions. Diplomats visited the United Arab Emirates this week to clarify whether actors in the region are complying with US sanctions.
Donyamali said, without naming any companies, that the negotiations have proven that foreign companies offer much better prices than their Iranian counterparts. A price of $ 100 per square meter ($ 9 per sqf) was offered for building cheaper prefabricated buildings. That means an investment of more than $ 24 billion in 4 million homes, money that Iran now does not have. He stressed that Iran’s position is not to pay cash to foreign companies and based the talks on the principle of oil exchange.
Iranian companies are charging almost double what foreign companies are willing to accept, Donyamali said. Most of the Iranian companies in such a large project would be state or quasi-state entities, some of which may be affiliated with the Islamic Revolutionary Guard Corps (IRGC).
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