- Monthly payments for 4 years to settle Iran oil dues - Tea Board, CPC, and Tea Exporters finalise barter mechanism - Plantation Minister to meet Iranian HC - Cabinet approval this week By Madhusha Thavapalakumar The Ceylon Petroleum Corporation (CPC) agreed on Thursday (25) to pay Rs. 880 million per month to the Sri Lanka Tea Board (SLTB) for the next four years to settle outstanding payments owed by the state-run fuel supplier to Iran. These payments will be made under a barter deal where Ceylon tea will be exported to Iran as a substitute for a long-standing debt of CPC to Iran, which was initially announced two weeks ago by the Minister of Plantation Industries Navin Dissanayake. The Tea Exporters Association (TEA), which proposed the barter system, had been inspired by India’s existing barter deal for tea exports with Iran. Iran is currently struggling under crippling economic sanctions imposed on it by the US, with other nations being unwilling to transact with it, fearing the wrath of the world’s superpower. Tightening of economic sanctions against Iran by the United Nations (UN) and the US has had a tremendous negative effect on the Colombo Tea Auction prices. Since tea is a food item which has received clearance for trading under humanitarian ground by the UN/USA, the problem for Sri Lanka was the non-availability of a banking system in Iran which is currently blacklisted. The benefit for the CPC from the deal is that it can settle the outstanding dollar payment in rupees and it can breakdown the payment into 48 instalments. The CPC has $ 240 million in outstanding payments to be made to Iran for oil imports, dating over six years back. Meanwhile, despite a comparatively less quantity of tea exports under the deal than usual, TEA and SLTB would be able to export tea to Iran for the next four years without being concerned over delayed payments from Iran for their exports. Accordingly, at the end of four years, CPC would have settled Rs. 42.2 billion to SLTB while SLTB would have exported tea worth Rs. 42.2 billion to Iran. The barter deal equally benefits isolated Iran. According to Iranian news reports, the country’s Ministry of Economy and Finance is drafting regulations to set up companies for doing barter trade with foreign partners as a way of evading US sanctions. At the moment, Iran has barter deals with a number of countries including China, India, and Russia where Iran mostly uses its oil for trade. Ministry of Plantation Industries Secretary J.A. Ranjith told The Sunday Morning Business that the Sri Lankan side of the barter deal is completed and it is the Iranian Government that now has to finalise a mechanism. “CPC, SLTB, and TEA collectively finalised a mechanism. Minister Navin Dissanayake will discuss this mechanism with the Iranian High Commissioner in Sri Lanka and get the approval from the Iranian Government. They will certainly give the approval,” he noted. Following the discussion with the Iranian High Commissioner, the proposed barter deal will reach the Cabinet of Ministers for their approval this week and will be implemented by the end of August. Upon reaching the Iranian High Commission in Sri Lanka for their comments on the deal, they refused to comment until the barter deal receives Cabinet approval. However, for the implementation of the deal, Iran also has to finalise a mechanism from their side, connecting the tea importers and the petroleum authorities of the country. According to Ranjith, the Iranian Government has confirmed that they are working on a mechanism. The Sunday Morning Business spoke to CPC Chairman G.S. Withanage on the barter deal and he assured that following the beginning of tea exportation under the barter deal, CPC would make the monthly payment directly to SLTB without any involvement of the Treasury. “We have to pay Iran an outstanding bill, but unfortunately, due to US sanctions on Iran, we cannot make the payments. Therefore, through this barter system, we can pay the Tea Board directly in rupees,” he noted. According to SLTB Chairman Lucille Wijewardena, a separate bank account would be created for payments from the CPC to the SLTB. Speaking to The Sunday Morning Business, TEA Secretary General Ranjith Abeykoon commended the barter deal as it would reduce the concerns of tea exporters over delayed payments as they will get paid by the CPC on a monthly basis. In 2017, Sri Lanka exported 27,418 metric tonnes of tea to Iran, but it dropped to 23,914 metric tonnes in 2018 due to US sanctions on Iran. The drop has also had a considerable impact on the overall tea exports during the year. In 2018, revenue from tea exports to Iran amounted to $ 120 million, according to Ranjith. It would be halved to $ 60 million approximately per year under the barter deal.