Iran has agreed to import tea from Sri Lanka to settle the debts of the East Asian country for purchased Iranian oil, official sources confirmed. .
Sri Lanka will export tea to Iran every month to settle a $251 million debt, Iran’s Trade Promotion Organisation said.
Unconventional payment method avoids sanctions imposed on Iran by the UN and US as no sanctioned banks will be involved,
The Sri Lankan Government had announced earlier that it had reached a deal with Iran to settle an outstanding debt by exporting tea to that value.
Alireza Peyman-Pak from Iran’s Trade Promotion Organisation was quoted as saying that “a deal was reached on Tuesday, according to which Sri Lanka will export tea to Iran every month to settle a $251 million debt for Iranian oil supplied to Sri Lanka nine years ago”.
The barter deal will allow sanctions-hit Iran to avoid having to use up scarce hard currency to pay for imports of the widely consumed staple, Peyman-Pak said, according to the AFP news service.
“Iran and Sri Lanka have great potential to develop mutual trade,” he said, adding that Iran’s non-oil exports to the country are valued at less than $100 million a year.
The Ministry of Plantation of Sri Lanka and the Ministry of Industries, Mines and Trade of the Islamic Republic of Iran agreed to formulate a scheme for the settlement of a sum of US$ 250,925,169 outstanding from the Ceylon Petroleum Corporation to the National Iranian Oil Company by means of utilizing the said sum to facilitate the export of Ceylon Tea to Iran by signing a memorandum of understanding
We are very optimistic that the US would be intervening where Sri Lanka would be paid in US dollars for tea exports to Iran, where sanctions prevent the Iranian tea importers to transact business in dollars,” said Rohan Fernando, the chairman of Sri Lanka’s Tea Exporters Association.
Fernando emphasized that it is difficult at present to regularize the tea trade with Iran due to the complications that the sanctions have created for conducting banking transactions.
Iranian banks, he said, are not allowed to deal with US dollars due to the sanctions. “They have to buy dollars from elsewhere to pay the Sri Lankan tea exporters,” Fernando has been quoted as saying by Sri Laka’s Ceylon Today newspaper.
Sri Lanka’s media reported last week that that the US has agreed to find a solution for settling tea trade between Iran and Sri Lanka.
Local authorities and Plantation Ministry officials highlighted concerns on how the industry was impacted due to their inability to obtain payments for tea exports through Iranian banks.
Iran was the second biggest market for Sri Lanka’s tea exports that grabs 14 per cent of the total tea exports from this island nation. Iran buys the highest amount of teas from Colombo comprising 48 percent of its market share of the total 80,000 MT tea imports to Iran.