Sri Lanka repays Iran’s $20 million oil debt with tea

Cash-strapped Sri Lanka said Wednesday it had exported tea worth $20 million to Iran to partially repay its $251 million oil debts, with Colombo saying Tehran’s visiting foreign minister had expressed “satisfaction” at 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 in December 2021, but exports were delayed by Colombo’s economic crisis that forced then-president Gotabaya Rajapaksa to step down in July 2022.

The barter deal allows sanctions-hit Iran to avoid having to use up scarce hard currency to pay for imports of popular tea.

It also allowed Sri Lanka to pay with tea, as the country was short of foreign currency.

The island defaulted on its $46 billion foreign debt in April 2022 and secured a $2.9 billion IMF bailout early last year.

Ceylon tea, known by the island’s colonial-era name, made up nearly half of Iran’s consumption in 2016. However, the proportion has declined in recent years.