Sri Lanka to pay Iran oil debt in tea as trade partners look for creative ways to avoid Trump sanctions

'If the CPC pays us, we can continue the export of tea to Iran as there is no ban on this commodity'

Adam Withnall
Monday 23 July 2018 14:00
Comments

Sri Lanka is drawing up proposals to get around international sanctions on Iran by paying its oil debt with the Middle East country in tea, according to a report.

Ceylon Petroleum Corporation (CPC), the national oil and gas company of Sri Lanka, owes Iran $250m (£190m) for oil purchases made recent months.

But new regulations designed to make Sri Lanka compliant with UN Security Council sanctions on Iran mean a straight financial transaction with Iranian government bodies could fall foul of the rules.

At the same time, Iran is the fourth-largest market for Sri Lankan tea, a commodity that is not prohibited by the terms of any UN Security Council sanctions.

Speaking to the country’s Sunday Times newspaper, Lucille Wijewardena, the chair of the Sri Lanka Tea Board, said the amount owed by CPC was the equivalent of a year’s tea exports going the other way.

“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 export to Iran,” he said.

Wijewardena said more talks would be held in the coming weeks to allow Sri Lanka to continue to trade with Iran in spite of UN sanctions. Sri Lanka exported 27,419 metric tonnes of tea to Iran in 2017.

Sri Lanka is not the only international partner reconsidering how it does trade with Iran, as the US prepares to impose tough new sanctions on Tehran at what Donald Trump has called “the highest level”.

Mr Trump announced two months ago that he would withdraw the US from the international agreement designed to ease sanctions on Iran, in exchange for restrictions on the country’s nuclear programmes.

The new US sanctions will begin in August with a ban on all dollar trade with Iran, and will then seek to punish US trading partners who invest in Iranian oil infrastructure or purchase crude from the country.

Indian rice exporters say they have already started to feel the pinch from the impending sanctions, as companies are forced to find new banking arrangements with European or Middle Eastern brokers, avoiding the dollar ban.

Iran is a big market for Indian basmati rice. At present, shipments for old contracts are going to Iran. But there is a delay in new contracts. So the trade is worried about Iran market,” Gumnam Arora, joint managing director of Kohinoor Foods, told the Economic Times.

Fear of angering the US has not stopped countries like India from engaging in high-level trade talks with Iran in the past month, as they seek to find sanctions workarounds.

For others, there is a sense of frustration with the sweeping nature of Mr Trump’s actions. Navin Dissanayake, Sri Lankan plantation industries minister, told the Daily FT: “Iran is buying a lot of our tea and we have a bilateral agreement with them. Just because the Americans put sanctions on them, it doesn't mean that they have to impose a sanction on us.”

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Please enter a valid email
Please enter a valid email
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Must be at least 6 characters, include an upper and lower case character and a number
Please enter your first name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
Please enter your last name
Special characters aren’t allowed
Please enter a name between 1 and 40 characters
You must be over 18 years old to register
You must be over 18 years old to register
Opt-out-policy
You can opt-out at any time by signing in to your account to manage your preferences. Each email has a link to unsubscribe.

By clicking ‘Create my account’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Register for free to continue reading

Registration is a free and easy way to support our truly independent journalism

By registering, you will also enjoy limited access to Premium articles, exclusive newsletters, commenting, and virtual events with our leading journalists

Already have an account? sign in

By clicking ‘Register’ you confirm that your data has been entered correctly and you have read and agree to our Terms of use, Cookie policy and Privacy notice.

This site is protected by reCAPTCHA and the Google Privacy policy and Terms of service apply.

Join our new commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in