From left: Highways and Road Development and Petroleum Resources Development Minister Kabir Hashim, Plantation Industries Minister Navin Dissanayake and SLTB Chairman Lucille Wijewardena
- Secures Cabinet approval for the barter deal
- CPC to pay US$ 5 mn monthly to tea exporters for 50 months
By Nishel Fernando
Sri Lanka is moving ahead to strike a US$250 million worth tea-for-debt barter deal and revive tea exports to Iran while settling outstanding oil credit over a 50-month period, subsequent to securing Cabinet approval.
The Cabinet of Ministers this week approved a joint Cabinet paper presented by the Minister of Highways & Road Development and Petroleum Resources Development Kabir Hashim and the Minister of Plantation Industries Navin Dissanayake to strike a tea-for-debt barter deal with Iran.
Addressing a press conference at the Sri Lanka Tea Board (SLTB) yesterday, Hashim revealed that Ceylon Petroleum Cooperation (CPC) would release US$5 million per month to tea exporters in Sri Lanka under the proposed barter deal.
Sri Lanka was unable to settle US$ 250 million worth debt to Iran dating back to 2012, as United States (US) imposed sanctions on Iran in 2016.
Although economic sanctions don’t apply for agricultural exports into Iran, Dissanayake noted that as Iranian banks have been kept out of the international banking system, there wasn’t any reliable payment method to conduct trade with Iran.
As the barter system doesn’t involve dollar transactions, he pointed out that it will not break or clout the sanctions.
Dissanayake also recently met with United States Ambassador to Sri Lanka and the Maldives, Alaina B. Teplitz to inform her on the proposed barter deal with Iran.
He noted that the ambassador didn’t raise any objections to the deal, hence, he believes that United States will not pose any obstacle to the deal in the future.
The Minister went on to say that the proposed barter deal might be the largest deal in the world at present.
The government expects to finalise the barter deal within next 2-3 months.
“An Iranian delegation will visit Sri Lanka in two weeks to discuss the next steps,” he added.
Meanwhile, the Tea Exporters Association (TEA) has been tasked with presenting the export quota for Ceylon Tea exporters.
“We have got a list of exporters who are selling to Iranian market. The TEA will come up with quotas and TEA will directly link up with the Iranian importers and to reach an agreement,” Dissanayake added.
Commenting on the financial capability of CPC, Hashim said that despite current challenges, the international liabilities have to be settled to maintain Sri Lanka’s financial credibility in global arena.
He also stressed that if State-Owned-Enterprises (SOEs) settle their outstanding debts to CPC, it will be in a better financial position.
The CPC recently warned that it would halt fuel supplies to CEB, unless the CEB settles the Rs. 40 billion outstanding payment. Similarly, SriLankan Airlines is also yet settle its outstanding CPC bills.
At present Sri Lankan exporters trade with Iran via the hawala method and other third party payments methods, which are time consuming and prone to abuse.
Iran was among the top three markets for Ceylon Tea, which has fallen to the fourth position currently.
Ceylon Tea exports to Iran declined to 27, 418 MT in 2017 to 23,914MT in 2018 by over 33,000 MT in 2016.
According to the Tea Exporters Association (TEA), the export volumes have further declined by over 500 MT during first five months of the year.