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Sri Lanka’s ‘Tea for oil’ deal with Iran abandoned

02 Aug 2020

A “tea for oil” barter deal proposed mid last year to settle the Ceylon Petroleum Corporation (CPC)’s outstanding payments to Iran has been abandoned by the present Government. This deal proposed by then Minister of Plantation Industries Navin Dissanayake, has been given up on as the relevant authorities are of the view that tea and oil prices do not tally together, The Sunday Morning Business reliably learns. Sources told us that the barter deal was “just a plan” and progress was not made either by the Sri Lankan or Iranian Government beyond the initial stage since it was proposed. It is also understood that the Iranian Government was not in favour of the deal.  In July last year, Dissanayake announced the barter deal where Ceylon Tea would be exported to Iran as a substitute for the CPC’s long-standing debt to Iran. The CPC has $ 240 million in outstanding payments to be made to Iran for oil imports, dating over seven years ago. 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. The 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 received clearance for trading under humanitarian grounds by the UN/US, 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 was that it could settle its outstanding dollar payment in rupees and break down the payment into 48 installments, settling about Rs. $ 4.7 million per month. Meanwhile, despite a comparatively low quantity of tea exports under the deal than usual, tea exporters would have been 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, the CPC would have settled Rs. 42.2 billion to the Sri Lanka Tea Board (SLTB) while the SLTB would have exported tea worth Rs. 42.2 billion to Iran. The barter deal was expected to equally benefit isolated Iran. 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.


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