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Sri Lanka settles $60m of Iranian oil debt with tea
Nearly 5,000 tons of globally popular Ceylon Tea were exported to Iran to settle under a tea-for-oil deal, said Tea Board Chairman Niraj De Mel, noting that the trade grew by nearly 270% compared to 1,850-ton shipments in the same period last year.
The tea-oil swap was agreed upon in late 2021, but exports were delayed by Sri Lanka’s economic crisis that forced then-president Gotabaya Rajapaksa to step down in July 2022.
The island nation defaulted on its $46bn foreign debt in April 2022 and secured a $2.9 billion bailout from the International Monetary Fund (IMF) early last year.
The barter deal allows sanctions-hit Iran to avoid having to use scarce hard currency to pay for imports of popular tea. It also has allowed Sri Lanka to pay with tea, as the country is short of foreign currency.
Sri Lankan officials have already said that the trade does not break US sanctions on Iran, since tea is a food item and the deal has not involved Iranian blacklisted banks.
The agreement alleviates Sri Lanka’s financial burden and strengthens trade ties between the two nations, Sri Lanka’s Ministry of Agriculture and Plantation Industries said in a statement.
Ceylon tea, known by the island’s colonial-era name, is the highest-earning crop in Sri Lanka in terms of foreign currency deals, bringing in some $1.3 billion annually. The tea is typically shipped to Iran via the United Arab Emirates.