Sri Lanka settles part of Iranian oil debt with tea

Sri Lanka, which is struggling with a foreign currency shortage, announced on Wednesday that it has exported $20 million worth of tea to Iran to settle part of its $251 million oil debt. The country’s prime minister’s office said that Iranian Foreign Minister Hossein Amir Abdullahian, who is currently visiting Sri Lanka, expressed “satisfaction” with the deal.

The tea-for-oil barter agreement was signed between the two countries in December 2021, but the tea exports were delayed due to the economic crisis that hit Colombo and forced then-President Gotabaya Rajapaksa to resign in July 2022.

The barter agreement allows Iran, which is under Western sanctions, to avoid using hard currency to pay for its tea imports. Sri Lankan officials have previously said that the tea-for-oil swap does not violate US sanctions on Iran because tea is a food item and there was no need to deal with Iranian banks that are on the blacklist.

The island nation defaulted on its $46 billion foreign debt in April 2022 and secured a $2.9 billion bailout from the International Monetary Fund early last year.

Ceylon tea, as Sri Lanka was known during the colonial era, accounted for about half of Iran’s consumption in 2016, but has declined in recent years.

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