Sri Lanka Pays Partial Oil Debt to Iran with $20M in Ceylon Tea

By Charles Kennedy - Feb 21, 2024

Sri Lanka has repaid $20 million in oil debt to Iran with tea in a move that Sri Lanka officials say do not violate U.S. sanctions on Iran, Agence France Presse reports. 

In April 2022, Sri Lanka defaulted on $46 billion in foreign debt, earning a $2.9-billion bailout from the International Monetary Fund (IMF), and leaving it bereft of cash to pay its oil debt to Iran. 

Sri Lanka owes a total of $251 million in oil debt to Iran, of which $20 million has now been paid in the form of tea. 

“So far US$20 million worth of tea has been exported to Iran under the barter trade agreement,” AFP cited  Sri Lankan Prime Minister Dinesh Gunawardena’s office as saying in a statement after talks.

The Sri Lanka-Iran oil-for-tea swap deal was signed in late 2021, but swaps were postponed due to continuing economic crisis in Sri Lanka and the resignation of its president in July the following year. Last year, Reuters cited Sri Lanka’s Tea Board Chairman, Niraj de  Mel as saying that the deal was originally that Sri Lanka would send Iran $5 million in tea every month for 48 months. 

Ceylon Tea is the highest-earning crop in Sri Lanka in terms of foreign currency deals. In 2022, according to Reuters, citing government data, Sri Lanka brought in $1.25 billion in foreign currency tea deals. The tea is typically shipped to Iran via the UAE. 

According to Reuters, the tea-for-oil swap deal is organized as such that the Ceylon Petroleum Corp, which is state-owned, which purchased the Iranian oil, gives Indian rupees to the Tea Board to ship tea, while Iranian tea importers pay riyals to the National Iranian Oil Company. 

By Charles Kennedy for Oilprice.com