Sri Lanka – Iran ‘tea-for-oil’ barter agreement making strong progress

The ongoing Sri Lanka and Iran ‘tea-for-oil’ barter agreement is now making strong progress and Sri Lanka has already settled over USD 20 million to Iran. “This agreement was to settle a total of USD 250 million for purchases made by Ceylon Petroleum Corporation (CPC) for oil imported from Iran in 2012”, said Chairman Sri Lanka Tea Board (SLTB) Niraj De Mel.In a bid to save draining of foreign exchange from Sri Lanka to service the high petroleum imports the then Minister of Finance, Mangala Samaraweera and Dr. Romesh Pathirana talked to National Iranian Oil Company of Iran officials since 2019 to trade tea instead of paying in USD when purchasing fuel to protect local forex reserves. The barter was agreed in 2021 for oil imported in 2012 however due to the economic crisis this deal was only signed last year.

“Since then we have made very strong progress and up to December 2023 we have settled around USD 20 million.”Explaining the modalities of the agreement he said that the local tea exporters to Iran get paid in Sri Lanka rupees by the Ceylon Petroleum Corporation. SLTB will be settling payments to Sri Lanka tea exporters upon confirmation of tea consignments are shipped to Iran by the tea exporters. This is scrutinized through a recognized Audit Firm.“The agreement is to send USD 5 million worth of tea each month to Iran for 48 months.”

De Mel said that with Iran facing a cold climate in the next few months we expect the demand for local tea to increase. “Hence we have requested the Minister of Power and Energy Kanchana Wijesekera to increase the monthly USD 5 allocation (equivalent to Sri Lankan rupees) made by them to local tea exporters. We have requested the Minister to increase this to USD 10 million and he has responded to this request positively.”

De Mel said that though there are some international restrictions imposed on Iran this ‘tea-for-oil’ barter agreement does not violate it. “This scheme will not violate any UN or US sanctions since tea has been categorized as a food item under humanitarian grounds while none of the black listed Iranian banks will be involved in the equation.”The total revenue realized for the period January – December 2023 from tea exports was USD 1.31 billion compared with USD 1.27 Billion recorded for the period January to December 2022. The increase of tea exports was USD 1.31 billion compared to the same period in 2022.

(Source : Daily News)