Turmoil in Iran has caused a stir among Sri Lankan tea exporters but shipments continue under the tea-for-oil barter deal between the two countries. Iran is one of the biggest buyers of Ceylon Tea.
The Iranian Rial that fell sharply against the US dollar has reportedly sparked protests initially among traders there that later spread to other parts of the country and a shutdown of public institutions. At least five deaths have been reported by Friday.
The devaluation of the Iranian currency has caused a worry among tea exporters but shipments are going to Iran, Sri Lanka Tea Board (SLTB) Chairman Raj Obeysekera told the Sunday Times Business.
Precautions are being taken but allocations for tea exports have come from Iran and shipments are continuing, he said.
Exporters are worried that there will be defaults which is quite natural, Mr. Obeysekera said adding that however, some major exporters have said they are not worried. In addition, authorities are in contact with the Iranian Ambassador in Sri Lanka on the current developments.
However, tea exporters have been very cautious as there has been a delay by Iran in sending the required documentation to Sri Lankan authorities to make the necessary payments to the exporters.
As a result tea exporters have been holding back orders and are right now not keen on accepting any new orders, former Tea Exporters Association Chairman Jayantha Karunaratne said.
He noted that this development has arisen since the last six months and exporters are uncertain of their payments.
Tea exporters have been in discussion with the Plantation Minister Samantha Vidyaratna constantly, he said.
Exporters believe if the situation persists it could result in a fall in prices that could impact on producers and Sri Lanka, currently facing its own rupee depreciation which is not helping exporters.
Sri Lanka has engaged with Iran on a tea for oil barter agreement that will help clear the country’s oil debt of US$251 million. Commencing in August 2023 Sri Lanka shipped US$5 million worth of tea each month to Iran and this amount increased to US$10 million worth of tea by February. Payments are made to the exporters by the Ceylon Petroleum Corporation (CPC) through the Sri Lanka Tea Board (SLTB).
Sri Lanka continues to buy Iranian oil through a third party via Dubai and Singapore.