• No impact on Iranian tea-for-oil barter mechanism
• CPC to continue to pay off loan payments under same mechanism

Only around $ 90 million of the $ 251 million owed by the Ceylon Petroleum Corporation (CPC) to Iran for oil imports remains outstanding following the success of the Iranian tea-for-oil barter mechanism, with the arrangement continuing to operate despite recent developments as it complies with the sanctions imposed on Iran, according to the CPC. 

Speaking to The Sunday Morning Business, CPC Managing Director Dr. Mayura Neththikumarage stated that recent comments by US President Donald Trump threatening additional tariffs on countries trading with Iran did not apply to Sri Lanka’s Iranian tea-for-oil barter mechanism. 

He stressed that the arrangement would continue to operate without any issues. “It doesn’t amount to trade; it is merely the repayment of a loan,” he stated.

Commenting further, Dr. Neththikumarage pointed out that the said mechanism had been introduced because of the sanctions imposed on Iran and was therefore not in violation of these sanctions. Therefore, the CPC will continue to pay off its loan payments under this mechanism.

On 12 January, Trump announced through his social media accounts that any country engaging in business with Iran would be subject to a 25% tariff when trading with the US, raising concerns with regard to the fate of Sri Lanka’s Iranian tea-for-oil barter arrangement.

Dr. Neththikumarage further revealed that the CPC had been paying the equivalent of $ 5 million per month to local tea exporters for tea exported to Iran, and as a result only a payment of around $ 90 million remained outstanding.

“From the original $ 251 million owed, only around $ 90 million remains outstanding,” he stated.

The Iranian tea-for-oil barter mechanism essentially involves the CPC transferring in Sri Lankan Rupees the equivalent of $ 5 million to the Sri Lanka Tea Board (SLTB), which will then pay local tea exporters for exports of tea to Iran up to a value of $ 5 million. Congruently, Iranian tea importers will pay the National Iranian Oil Company in Iranian Rials.

The internal demand for tea in Iran amounts to 100,000 MT annually. Iranian tea producers yield approximately 25,000–30,000 MT per year, necessitating the import of an additional 60,000–70,000 MT from different sources.