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Tea-for-Oil barter deal likely by Friday 

05 Apr 2021

  • Deal to be closed virtually

  The virtual agreement to implement the tea-for-oil barter deal between Sri Lanka and Iran is expected to be signed between officials of both countries on this Friday (9).  The terms of the aforementioned barter agreement involve large sums of payments due to the Iranian Government from Ceylon Petroleum Corporation (CPC), for fuel exported to Sri Lanka several years ago. Thus, as proposed by the previous Government, Sri Lanka will export tea to Iran in an effort to offset this debt.  “It is not confirmed, but the virtual meeting and signing might take place on 9 April,” stated Tea Exporter’s Association (TEA) Chairman Sanjaya Herath. In addition, Sri Lanka Tea Board (SLTB) Director General Aruna Siriwardene also noted that the aforesaid date is tentative, although the virtual meeting is confirmed to take place in the present month.  “The Cabinet approved this proposal approximately four months ago, and we are ready to sign the agreement,” Siriwardene stated.  Herath added: “They have obtained Cabinet approval; it’s a matter of the agreement being signed by both parties. This is planned to be a virtual meeting and signing.”  Moreover, it was highlighted that Sri Lanka is unable to settle the aforementioned debt with liquid cash, due to sanctions placed on Iran by the US.  Therefore, as proposed by the previous Government, the Sri Lankan Government and TEA assessed the debt to be paid through the export of Ceylon Tea. Accordingly, the Government alongside SLTB evaluated how to settle these fuel debt obligations that have been due for several years, amounting to $ 250 million, through equal instalments over 48 months.  It was also previously revealed that Sri Lanka has not imported fuel from Iran since it was sanctioned. “How it works is that every month, we can export $ 5 million worth of tea to Iran. It is estimated to be 800-900 metric tons per month,” Herath previously explained.  Furthermore, he also reported that the Iranian officials were not pleased with the terms of this agreement, as they preferred that Sri Lanka settle its debt by exporting $ 10 million worth of tea per month to Iran for two years, rather than 48 months (four years). In addition to this, it was revealed that this proposal was approved by Cabinet, as well as the United States (US) Embassy.  Furthermore, it was also mentioned that this barter trade agreement can help TEA reclaim its tea export market share, which was overtaken by India in 2019. As Iran imports 90% of its national requirement of tea from India and Sri Lanka, the TEA argues that this barter system would increase the association’s exposure and support it in reclaiming its market share. 


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