Sri Lanka settles Iranian oil debt with tea exports

Shafaq News / Sri Lanka, grappling with foreign currency shortages, announced on Wednesday that it exported $20 million worth of tea to Iran to partially settle its $251 million oil debt, a deal earning approval from Iran's Foreign Minister.

Sri Lankan Prime Minister Dinesh Gunawardena stated, "Tea worth $20 million has been exported to Iran under the commercial barter agreement," as reported by AFP and cited by Al-Arabia Business.

The tea-for-oil deal was agreed upon in December 2021 but faced delays due to economic crises in Colombo, leading then-President Gotabaya Rajapaksa to resign in July 2022.

The barter agreement allows Iran, under Western sanctions, to avoid using hard currency for tea imports.

Sri Lankan officials previously stated that tea-for-oil swaps do not violate US sanctions on Iran since tea is a food item and does not necessitate dealings with blacklisted Iranian banks.

Sri Lanka defaulted on its $46 billion external debt in April 2022 and secured a $2.9 billion IMF bailout earlier last year.

Notably, Sri Lanka's renowned Ceylon tea once accounted for roughly half of Iran's consumption in 2016 but has seen a decline in recent years.