Sri Lanka Offers to Pay Oil Debts to Iran with Tea to Avoid U.S. Sanctions

The Sri Lanka Tea Board has asked the Ceylon Petroleum Corporation (CPC), the country’s national oil and gas company of the country, to consider paying the $250 million it owes Iran for oil purchases with tea.

Lucille Wijewardena, the chair of the Sri Lanka Tea Board, said: “If the CPC pays us, we can continue the export of tea to Iran, as there is no ban on this commodity. The amount the CPC owes Iran can offset payment for a year of tea exports to Iran.”

The proposal by the Sri Lanka Tea Board follows recent efforts by the country’s foreign minister, Tilak Marapana, to find a creative way of circumventing the new set of U.S. sanctions taking effect on November 4. Mr. Marapana has, however, stressed that the government would comply with the UN Security Council’s sanctions against Iran.

Goodarz Khordadpour, deputy marketing manager of the Iran Tea Organization, described the proposal as “impossible and unacceptable.” He explained: “Iran produces 25,000 metric tons of tea. We only need to import between 105,000 to 110,000 tons.”

“Iran imports $275,000 worth of tea every year,” he added. “The proposal would force Iran to import 53 million tons of tea. That is 193 times more than our annual requirement.”

Tea growers and producers say that inconsistent import practices have hurt their trade. Most of the tea imports are legal, but an economic mafia with strong ties to the government controls a significant portion of the business.

Until a few years ago, there were more than 34,000 hectares of tea plantations in the northern provinces of Gilan and Mazandaran. However, only 15,000 hectares are farmed these days due to neglect and mismanagement. Also, more than 50 percent of tea factories operate at reduced capacity causing massive job cuts.

Given the impending U.S. sanctions, the Iranian government may have to take the tea-for-oil deal, if the government of Sri Lanka is to approve the measure. The Islamic Republic had to accept similar offers from many European and Asian countries after the US Comprehensive Iran Sanctions, Accountability, and Divestment Act went into effect in 2010. If approved, the deal would hurt Iranian tea growers and traders.

Some countries will undoubtedly take advantage of the situation by trying to trade useless goods, most of which Iran produces domestically, as oil payments.

Meanwhile, the increasing cost of raw materials will raise wholesale and retail prices, making it very difficult for domestic products to compete with the Chinese and Turkish goods flooding the market.

[Translated from Persian by Fardine Hamidi]

Link to Farsi page