TEHRAN (Iran News) – Sri Lanka Inks $251m Tea for Oil Debt Deal With Iran. Iran and Sri Lanka and Iran on Tuesday signed a Memorandum of Understanding (MoU) to settle $251 million worth of credit outstanding with Ceylon Petroleum Corporation (CPC) with supply of tea of equivalent value.
The Plantation Ministry and Iran’s Ministry of Industries, Mines and Trade were the signatories of the MoU. Under the scheme, $ 251 million outstanding from CPC to Iran’s National Iranian Oil Company will be settled via the export of Ceylon Tea to Iran.
The Ministry of Plantation of Sri Lanka and the Ministry of Industries, Mines and Trade of the Islamic Republic of Iran agreed to formulate a scheme for the settlement of a sum of US$ 251 Million outstanding from the Ceylon Petroleum Corporation to the National Iranian Oil Company by means of utilizing the said sum to facilitate the export of Ceylon Tea to Iran by signing a memorandum of understanding.
The MoU was signed Dr. Ramesh Pathirana, Minister Plantation of Sri Lanka and Alireza Paymanpak, Deputy Minister of Industry, Mine and Trade of Islamic Republic of Iran.
Iran is among the top 10 importing countries of Ceylon Tea for the past several decades. Ceylon Tea which had a market share of around 47% in 2016 dropped to around 25% in 2020 due to the economic sanctions resulting in banking restrictions.
Due to U.S. sanctions imposed on Iran in November 2012 and with the absence of an accepted payment mechanism through the banking system, Sri Lanka tea exporters found it difficult to receive the export proceeds from Iranian buyers.
The proposed scheme is to seek the possibilities of operationalizing a mechanism to settle the long outstanding debt to the National Iranian Oil Company (NIOC) by Ceylon Petroleum Corporation (CPC) through increasing the export of Ceylon Tea.
Under this scheme, the Ministry of Finance is expected to release Sri Lanka Rupees of an equivalent amount of $5m per month in settlement of the outstanding debt arising until the entirety is settled.
The Tea Board will then pay individual exporters in rupee at the central bank exchange rate.
“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,” Sri Lanka’s Plantation Ministry said in a statement.
The deal will neither bring foreign exchange to the country and non will go out, the ministry said.
Sri Lanka had exported $14.5m of tea to Iran up to November 2021, up 0.39 percent from a year earlier.
Sri Lanka’s Plantation Ministry said Ceylon Tea export to Iran had dropped from a peak of 38.42 million kilograms in 2013.
After signing the MoU, Paymanpak said that unfortunately oil has been the major trade item between Iran and Sri Lanka and the non-oil exports to Sri Lanka are less than $100m.He added that unfortunately Sri Lankan business activists are not aware of Iran’s economic capacities or its non-oil exports and he has tried to prepare the grounds for boosting cooperation during his visit.
He noted that a joint economic committee is to be first launched and then the two countries will move for the launch of the joint chamber of commerce.
He noted that Sri Lanka can be a good market for Iranian companies in the fields of petrochemicals and dairy products, and in return Iran can import some raw material but talks should be held on the price for materializing the deal.
Paymanpak noted that Iran can take advantage of Sri Lanka in production of agro machineries or assembling final products in this country as Sri Lanka can be a good gateway for Iran’s products to the East Asia.
He reiterated that direct relation between business activists of Iran and Sri Lanka is the best solution for expansion of trade ties between the two countries and called for the launch of the joint chamber of commerce.
He went on to say that there are huge agro and mining resources in Sri Lanka that can create good opportunity for direct or indirect exports of Iranian products.
