Sri Lanka signs $ 251 mn oil-for-tea deal with Iran

Sri Lanka signs $ 251 mn oil-for-tea deal with Iran

Sri Lanka signs $ 251 mn oil-for-tea deal with Iran

Written by Zulfick Farzan

22 Dec, 2021 | 11:49 am

COLOMBO (News 1st); Sri Lanka and Iran on Tuesday (21) signed a Memorandum of Understanding (MoU) to settle $ 251 million worth of credit outstanding with Ceylon Petroleum Corporation (CPC) with supply of tea of equivalent value.

The Plantation Ministry and Iran’s Ministry of Industries, Mines and Trade were the signatories of the MoU. Under the scheme, $ 251 million outstanding from CPC to Iran’s National Iranian Oil Company will be settled via the export of Ceylon Tea to Iran.

The Ministry of Plantation of Sri Lanka and the Ministry of Industries, Mines and Trade of the Islamic Republic of Iran agreed to formulate a scheme for the settlement of a sum of US$ 251 Million outstanding from the Ceylon Petroleum Corporation to the National Iranian Oil Company by means of utilizing the said sum to facilitate the export of Ceylon Tea to Iran by signing a memorandum of understanding.

The MoU was signed Dr. Ramesh Pathirana, Minister Plantation of Sri Lanka and Alireza Paymanpak, Deputy Minister of Industry, Mine and Trade of Islamic Republic of Iran.

Iran is among the top 10 importing countries of Ceylon Tea for the past several decades. Ceylon Tea which had a market share of around 47% in 2016 dropped to around 25% in 2020 due to the economic sanctions resulting in banking restrictions.

Due to US sanctions imposed on Iran in November 2012 and with the absence of an accepted payment mechanism through the banking system, Sri Lanka tea exporters found it difficult to receive the export proceeds from Iranian buyers.

The proposed scheme is to seek the possibilities of operationalizing a mechanism to settle the long outstanding debt to the National Iranian Oil Company (NIOC) by Ceylon Petroleum Corporation (CPC) through increasing the export of Ceylon Tea.

Under this scheme, the Ministry of Finance is expected to release Sri Lanka Rupees of an equivalent amount of USD 5 Million per month in settlement of the outstanding debt arising until the entirety is settled.

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