In a desperate measure to pay off the oil debt of Iran, Sri Lanka plans to repay the debt with tea. Thereby indicating a potential barter tradeoff between the 2 countries. However such loan and repayment agreements are more common.
Following this kind of trade-off, an interesting evolution has now taken place in global trading and economics.Sri Lanka currently has been importing oil from Iran for several years.
During the period of the said oil imports, Sri Lanka has accumulated a cumulative debt of around $ 251 million over the past four years of heavy oil imports from Iran. The Sri Lankan government in its recent sensational announcement has addressed this oil debt issue.
The government announced- “We will repay the loan in the form of barter, not in cash, and will supply Ceylon tea products of value to Iran.” With this statement, Sri Lanka currently is the only country in the world to have made such a statement in terms of foreign trade in the last fifty years.
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Sri Lankan Minister Ramesh Pathirana during his press release made an official statement in this regard. During his address, the Sri Lankan Minister said that the government would repay Iran’s oil debt with a supply of $ 5 million worth of tea products every month to Iran from January 2022.
With Iran’s total debt on oil products accumulating for the past four years. It is clearly evident that the Sri Lankan government’s decision to repay oil debts with periodic tea exports looks like a decision taken under pressure and as a last resort at the last moment.
About the sanctions and associated violations
Since Iran is also under the ambit of UN and US sanctions. However, considering from a humanitarian view ( cases of emergency) the Sri Lankan government has been reminded and told that the tea is on the food list.
Sri Lanka while explaining such a decision has said that it had taken this decision without any objections from Iranian banks.
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