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Tea exporters to continue selling to Russia

07 Mar 2022

  • Plans to obtain payments through non-sanctioned banks
  • Tea Board Chair points out Russia is SL’s 3rd largest tea market
    BY Shenal Fernando Sri Lankan tea exporters are now making arrangements to receive their payments in lieu of tea exported to Russia, through banks which have not been sanctioned as of yet, as a consequence of the decision by the European Union (EU) to exclude seven Russian banks from the Belgium-based Society for Worldwide Interbank Financial Telecommunication (SWIFT) system, Sri Lanka Tea Board Chairman Jayampathy Molligoda told The Morning Business.   According to Molligoda, the invasion of Ukraine by Russia, which is Sri Lanka’s third largest tea export market, has not had a significant impact on the country’s tea industry as of yet. However, he did admit that Sri Lanka will have to wait and see how these recent sanctions imposed by the West on Russian banks will impact the country’s tea industry. Explaining further, he stated that Sri Lankan tea exporters are still able to ship to Russia and that the Port of St. Petersburg is still functioning. However, according to him, the current issue is getting the money for the shipments out.  “Importers from the Russian end and trading partners are trying to negotiate documents through Russian banks that have not been sanctioned as of yet, such as Austrian-based Raiffeisen Bank International (RBI) and around two or more banks and our banks,” stated Molligoda. Speaking to The Morning Business yesterday (6), Colombo Tea Traders’ Association (CTTA) Chairman Jayantha Karunaratne disclosed that there is a risk of delay or partial default on the part of Russian tea importers, following the collapse of the Russian ruble to over $ 120 from $ 74 before the war. Therefore, according to him, tea exporters are currently taking precautions to not have significant exposure to  Russia. Explaining further, Karunaratne stated: “It is also not clear whether shipping lines will carry cargo to Russia. So it is currently not clear whether the shipments in transition will be delivered to Russia or returned. So the potential impact on our tea industry will become clear in the coming weeks.”    Moreover, Molligoda noted: “Russia is the third largest tea export destination, accounting for 10% of Sri Lanka’s $ 285 million annual exports. The first being Iraq, then Turkey, followed by Russia.”       On 26 February, the US, the European Commission, the UK, and Canada announced a commitment to remove certain Russian banks from the SWIFT system or restrict permitted transactions. Consequently, the EU announced last Wednesday (2) that seven Russian banks will be excluded from the SWIFT system as part of its strategy to cut off major parts of the Russian economy from the international financial system and limit access to US dollars.  However, so far, no decision has been made to exclude Sberbank, Russia’s largest lender, and Gazprombank, because they are the main channels for payments for Russian oil and gas, which EU countries are still buying despite the conflict in Ukraine.       SWIFT is a secure system involving 11,000 member banks that allows banks to relay information about financial transactions to one another, which is essential in international transactions.


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