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Tea-for-oil barter deal with Iran by April

09 Mar 2021

 

  • $ 250 m to be settled in 48 months

  • Iran to sign deal virtually

    The Sri Lankan Government is expected to finally implement a barter deal with the Iranian Government – which was proposed by the former Government during its tenure – by early April this year, The Morning Business learns.  Under this barter deal, the Sri Lankan Government would be exporting tea to offset large sums of payments owed to the Iranian Government by Ceylon Petroleum Corporation (CPC) for fuel it exported to Sri Lanka a couple of years ago.  Speaking to The Morning Business, Tea Exporters Association (TEA) Chairman Sanjaya Herath reported that, as Sri Lanka is unable to settle obligations with liquid cash due to sanctions placed on Iran by the US, the Sri Lankan Government, in agreement with TEA, has evaluated the debt to be paid through exportation of Ceylon Tea.   “We have decided to export tea to Iran in exchange for fuel Sri Lanka purchased sometime back. Sri Lanka is unable to make those pending payments due to sanctions that have been imposed on Iran by the US,” Herath stated. Accordingly, the Government and the Sri Lanka Tea Board (SLTB) are planning to settle the fuel debt obligations of $ 250 million, which have been due for several years, through equal instalments over 48 months. It was also highlighted that Sri Lanka has not imported fuel from Iran since it was sanctioned. “How it works is that every month, we can export $ 5 million worth of tea to Iran. It is estimated to be 800-900 metric tons per month,” Herath explained. Furthermore, he reported that the Iranian officials were not pleased with the terms of this agreement, as they preferred that Sri Lanka settle its debt by exporting $ 10 million worth of tea per month to Iran for two years, rather than 48 months (four years).  “They wanted us to increase it to $ 10 million a month so that we can finish this within two years, but it is going to be about 48 months,” Herath stated.  In addition to this, it was revealed that this proposal was approved by Cabinet, as well as the United States (US) Embassy, and that this barter trade will be implemented following Iranian officials virtually signing the agreement.  “This agreement is going to be signed virtually, in the next one or two weeks. Then, the paper would be circulated, which includes the methodology of how exporters should get on board with this deal, after which it will be implemented.” Herath reported. Furthermore, it was also mentioned that this barter trade agreement can help TEA reclaim its tea export market share, which was overtaken by India in 2019.  As Iran imports 90% of its national requirement of tea from India and Sri Lanka, TEA argues that this barter system would increase the association’s exposure and support it in reclaiming its market share. 


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