Iranian authorities have signed an agreement with Sri Lanka that will allow the South Asian country to repay its debt to Iran through tea exports.
Iranian Deputy Minister of Commerce Alireza Peymanpak sign a memorandum of understanding on the proposal with Sri Lankan Minister of Plantation Industries Navin Dissanayake earlier this week in the Sri Lankan capital Colombo.
Sri Lanka’s Ceylon Petroleum Corporation (CPC) owes Tehran some $ 251 million for past oil imports. As part of the deal, Sri Lanka’s treasury is expected to release around $ 5 million rupees per month to pay tea exporters.
The barter deal resurrects a tactic often used by Iran in the past to try to circumvent international sanctions, although the proposed deals often fail before they can be implemented.
It is also useful for Sri Lanka, which suffered from the collapse of its tourism industry during the Covid-19 pandemic and is experiencing a debt and currency crisis.
Sri Lanka Tea Board officials previously pitched the idea of a tea-for-debt swap in 2018, with a plan for the CCP to pay the country’s tea growers for any exports to Iran. Sri Lanka Tea Board Chairman Lucille Wijewardena said at the time that debts were equivalent to the equivalent of a year of tea exports to Iran. However, the plan ultimately went nowhere.
Prior to that, in 2013 and 2014, there had been reports that Iran and Russia had agreed to trade up to 500,000 bpd of Iranian oil for Russian goods over two or three years, in the part of a deal worth up to $ 1.5 billion per month. Russian officials have denied the existence of such an agreement, but rumors about it persisted for several years.
Earlier this year, there had been speculation about a possible Tehran-Beijing barter deal involving Iranian oil and Chinese J-10C fighter jets.
India and Pakistan have also been linked in the past to possible barter deals, typically trading Iranian oil for consumer or agricultural goods.
Discussions of possible barter deals tend to intensify when Iran feels pressured on the international stage. In 2018, as the administration of US President Donald Trump threatened to pull out of the 2015 Iran nuclear deal – which relaxed trade restrictions on the country – Iranian lawmaker Assadollah Qarehkhani told local media that parliament had set up a special commission to deal with barter transactions.
The 2015 accord is currently the subject of talks in Vienna, where signatories including the United States and European countries hope to revive it. Tehran, however, may be bracing for the talks to drag on or collapse.