Tuesday, June 25, 2024
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Sri Lanka and Iran hold bilateral talks opening options on oil for tea deal

By: Staff Writer

Colombo (LNW): Sri Lanka and Iran held talks on bilateral relations as the island nation is in the process of starting a crude payment through exporting tea to Tehran.

The meetings of Sri Lanka Foreign Minister with President Ebrahim Raisi AND Iranian Foreign Minister Hossein Amir-Abdollahian Will focus on a new area of bilateral relationship and explore new investments while the sanctions are on, a Sri Lankan Foreign Ministry official disclosed.

“Sri Lanka does not want to go against the sanctions, but it wants to have close relations with Iran,” the official said

Iran and Sri Lanka revived an agreement to barter tea to retire $250 million in oil debts dating to 2012.

Terms call for the state-run Ceylon Petroleum Corp. to transfer the equivalent of $5 million monthly (about 1.5 billion rupees) to the Sri Lanka Tea Board.

The funds will then be paid to tea exporters Tea Board top official said adding that, Iranian tea importers will pay the National Iranian Oil Company in riyals.

Sri Lanka’s Foreign Minister Ali Sabry met with his Iranian counterpart Hossein Amir-Abdollahian on Saturday (05) and discussed bilateral relations as the island nation is in the process of starting a crude payment through exporting tea to Tehran.

Sri Lanka inked a deal in December 2021 again after 2012 to set off export of tea to Iran against a legacy oil credit owed by state-run Ceylon Petroleum Corporation to the National Iranian Oil Company, without breaking US sanctions.

However, the ‘oil for tea’ deal did not materialize until recent months due to some practical difficulties, both Iran and Sri Lankan officials have confirmed.

Sabry has traveled to Tehran at the invitation of Iran’s Foreign Minister Abdollahian and is scheduled to meet President Ebrahim Raisi and some other senior officials of Iran in his four-day official visit.

Iran and Sri Lanka revived an agreement to barter tea to retire $250 million in oil debts dating to 2012. The agreement effectively bypasses Western sanctions and will ease financial hardships in both countries caused by politics, economics, and war.

Sri Lanka’s plantation ministry issued a statement assuring all parties that the agreement “will not violate UN or U.S. sanctions since tea is categorized as a food item on humanitarian grounds. None of the blacklisted Iranian banks will be involved in the equation.”

In past years, Iran spent as much as $125 million buying Sri Lankan black tea, an expenditure that declined to $70 million in 2022.

Iran’s domestic demand for tea stands at 100,000 metric tons per year. Growers in Iran produce some 25,000 to 30,000 metric tons each year, so a volume of 60,000 to 70,000 metric tons of tea need to be imported from various origins.

Trade resumed in July as Sri Lanka exporters shipped an estimated $2 million worth of tea to offset $251 million owed Iran, according to the publication Iran International. Terms call for 48 monthly installments.

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