Sri Lanka Repays $20M Iranian Oil Debt with Tea.
On Wednesday, cash-strapped Sri Lanka announced that it had exported tea worth $20 million to Iran as partial repayment for its $251 million oil debts.
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Sri Lankan Prime Minister Dinesh Gunawardena’s office stated that Iranian Foreign Minister Hossein Amir-Abdollahian expressed satisfaction with the deal during discussions.
The tea-for-oil agreement was reached in December 2021, but export delays occurred due to Sri Lanka’s economic crisis, which led to the resignation of former President Gotabaya Rajapaksa in July 2022.
This barter arrangement enables Iran, affected by sanctions, to avoid using scarce hard currency for tea imports while allowing Sri Lanka to settle payments with tea due to a shortage of foreign currency.
Sri Lanka defaulted on its $46 billion foreign debt in April 2022 and received a $2.9 billion IMF bailout in early 2023.
Although Ceylon tea once accounted for nearly half of Iran’s consumption in 2016, its share has decreased in recent years.
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On the other hand, the decline in Sri Lanka’s tea exports to Iran reflects shifting consumption patterns and increased competition from other tea-producing countries.
Despite this, the tea-for-oil deal serves as a crucial step towards addressing Sri Lanka’s debt obligations and strengthening economic ties with Iran. As both nations navigate their respective economic challenges, such agreements provide avenues for mutual cooperation and support.
Additionally, the successful implementation of this deal underscores the resilience and adaptability of Sri Lanka’s tea industry in the face of evolving global dynamics and economic uncertainties.
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