The Sri Lanka Tea Board confirmed that discussions are underway towards finalising a crucial barter deal with Iran to resolve an impasse over exports and payment due on oil imports.
“We are continuing the process of seeking the possibilities of a barter system with Iran to settle a long-outstanding debt of $240 million by Ceylon Petroleum Corporation (CPC),” Sri Lanka Tea Board Chairman Jayampathy Molligoda told the Daily FT.
Noting that there are multiple views to resolve the impasse over tea exports to Iran, he said that the Government is currently in discussion with all related parties to proceed with the idea.
During the previous regime, Sri Lanka lobbied the US many times, pointing out that tea is an agricultural good which does not come under sanctions, and millions of Sri Lankan workers and livelihoods should not be affected by the global political situation. However, despite many attempts, the authorities failed to come up with a settlement.
Iran is one of the most important markets for Ceylon Tea, and the tightening of economic sanctions against the country by the United Nations (UN) and United States of America (USA) has had a tremendous negative effect on the Colombo Tea Auction prices.
Sri Lanka’s tea exports to Iran declined from over 33,000 MT in 2016 to 27, 418 MT in 2017, and to 23,914 MT in 2018. At present, Sri Lankan exporters trade with Iran via the ‘hawala’ method, and other third party payments methods, which are time-consuming and prone to abuse.
Due to trade sanctions imposed on dollar transactions with Iran by the US, banks refuse to engage in dollar transactions with Iranian banks. (CdeS)