- Seek to increase monthly tea exports to Iran from $ 5 m to $ 10 m during winter peak
- SLTB confirms Iranian request amid high demand for tea in upcoming months
- Winter season, Iranian New Year, and Ramadan fast fuel surge in Iranian tea demand
- Sri Lanka aims to settle $ 240 million debt owed to Iran over 48 months
A proposal has been made by Iranian tea importers to increase the quantity of tea imported to Iran under the Iranian tea-for-oil barter mechanism, from its current $ 5 million limit to around $ 10 million during the winter months, according to the Sri Lanka Tea Board (SLTB).
Speaking to The Sunday Morning Business, SLTB President Niraj de Mel revealed that under the Iranian tea-for-oil barter mechanism, the tea exported to Iran was capped at $ 5 million per month.
However, due to the expected increased demand for tea in Iran over the coming months, a request has been made by Iran to consider increasing the tea exported under the barter mechanism during the coming months to at least $ 10 million.
De Mel stated: “A request was made [to increase the monthly tea exports to Iran] by the Iranian side through their organisation that coordinates this arrangement by issuing licences to Iranian tea importers. I believe the request has gone through the Iranian Embassy. I was also involved in a discussion with the Minister of Power and Energy and officials of the Iranian Embassy where I made this request. I also made the request to the Chairman of the Ceylon Petroleum Corporation (CPC), who assured me that they will look into the possibility of increasing their payments to us.”
He pointed out that when the request had been made in January 2024, there had been high demand for tea in Iran due to the winter season. Furthermore, the Iranian New Year, which will be celebrated in the third week of March, will also lead to a high demand for tea.
In addition, he pointed out that the Ramadan fast would commence from 11 March, during which tea consumption in Iran was quite high. Therefore, the proposal is that tea exports be increased to at least $ 10 million for the coming few months.
He stated that since the initiation of the tea-for-oil barter mechanism in August 2023, Sri Lanka had paid off Rs. 25 million and intended to pay off $ 240 million in 48 months.
The Iranian tea-for-oil barter mechanism essentially involves the CPC transferring in Sri Lankan Rupees the equivalent of $ 5 million to the SLTB, which then pays local tea exporters up to $ 5 million for exports of tea to Iran. Congruently, the Iranian tea importers pay the National Iranian Oil Company in riyals.
Accordingly, the tea exported to Iran under this barter agreement will be used to pay off $ 240 million of the $ 251 million owed by the CPC to Iran for fuel imports.
The success of this barter mechanism represents a significant development for Sri Lanka amidst its current foreign exchange liquidity crisis and in light of the importance of Iran as a tea export market for Sri Lanka.
Iranian tea exports comprised as much as $ 125 million in value per annum over the previous years, before falling to around $ 70 million in 2022.
The internal demand for tea in Iran amounts to 100,000 metric tonnes annually. Iranian tea producers yield approximately 25,000-30,000 metric tonnes per year, consequently necessitating the import of 60,000-70,000 metric tonnes of tea from different sources.
– By Shenal Fernando