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Sri Lanka repays $20m of its Iranian oil debt with tea

February 22, 2024 at 1:30 pm

Tea leaves brought by workers to be weighed and sent to be processed at a tea garden in Ella, Sri Lanka on May 31, 2023 [ Rebecca Conway/Getty Images]

Sri Lanka announced yesterday that it had exported tea worth $20 million to Iran to pay part of its oil debt amounting to $251 million, noting that Tehran’s Foreign Minister expressed his “satisfaction” with the deal.

“So far $20 million worth of tea has been exported to Iran under the barter trade agreement,” Sri Lankan Prime Minister Dinesh Gunawardena’s office said in a statement after talks with Iranian Foreign Minister Hossein Amir-Abdollahian.

The tea-for-oil deal was agreed upon between the two countries in December 2021, but the export of tea was delayed due to the economic crisis that struck Colombo and forced then-president Gotabaya Rajapaksa to step down in July 2022.

The barter agreement allows Iran, which is under Western sanctions, to avoid using hard currency to pay for tea imports.

Sri Lankan officials had previously said that exchanging tea for oil did not constitute a violation of US sanctions on Iran, because tea was a food item and there was no need to deal with blacklisted Iranian banks.

The island defaulted on its $46 billion foreign debt in April 2022 and received a $2.9 billion bailout from the International Monetary Fund (IMF) early last year.

READ: Sri Lanka set to start tea-for-oil barter with Iran next month