Sri Lanka Settles $55 Million Debt to Iran with Tea

Sri Lanka has announced the payment of another portion of its debt to Iran for crude oil imports through tea exports. The Chairman of the Sri Lanka Tea Board has stated that the repayment amount to Iran is $55 million. This amount is part of Sri Lanka's $251 million debt for oil imports from Iran, of which $20 million was also settled in the form of tea exports last year. The Sri Lankan Ministry of Agriculture has described this exchange as part of a memorandum of understanding signed between the two governments, which, according to the ministry's statement, has made the repayment of Sri Lanka's debt to Iran possible in a 'creative' manner. The statement notes that EU sanctions, the COVID-19 pandemic, and the severe drop in tourist arrivals to Sri Lanka following the Easter Sunday terrorist attacks in 2019, which left 200 dead, have severely impacted Sri Lanka's economy and complicated the dollar reserves needed for repaying its debt to Iran. Niraj De Mel, the Chairman of the Sri Lanka Tea Board, announced that about $60 million of this debt has been repaid to date. He also reported a threefold increase in Sri Lanka's tea exports to Iran based on an agreement with the Islamic Republic. According to this official, nearly five million kilograms of tea were exported to Iran in the first five months of 2024, while this figure was only 1.85 million kilograms during the same period last year. This memorandum not only helps address Sri Lanka's debt repayment to Iran but also strengthens trade relations between the two countries. The Iranian ambassador in South Korea stated that they incurred a 15% loss by converting blocked funds. The tea-for-oil exchange agreement was signed in December 2021 between the two countries, but tea exports to Iran were delayed due to Sri Lanka's economic crisis. This economic crisis led to the resignation of then-Sri Lankan President Gotabaya Rajapaksa in July 2022. In addition to Sri Lanka, which is facing a currency shortage, Iran, under severe economic sanctions, is also trying to use commodity exchanges for oil to utilize its foreign exchange earnings for other matters. According to Sri Lankan officials, the tea-for-oil exchange does not violate U.S. sanctions against Iran, as tea is a food product and this exchange does not involve sanctioned Iranian banks.