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The Iranian regime’s president Ebrahim Raisi arrived in Sri Lanka for a one-day visit on April 24. The main purpose of Raisi’s trip to Sri Lanka is said to address Sri Lanka’s $251 million oil debt. Raisi was offering a barter deal, exchanging oil for Sri Lankan tea. According to informed sources, the tea imported into Iran from Sri Lanka was of inferior quality, essentially the poorest quality tea of that country, sent to Iran. In light of Iran’s economic crisis, extensive imports of tea have seriously harmed domestic tea production in the country.
Tea production in Sri Lanka began in 1858 and was initiated by the British, who colonized the island then known as Ceylon until 1972. At the beginning of the 21st century, tea production in Sri Lanka had exceeded 300,000 tons annually. Sri Lankan exported tea is black tea, also known as Ceylon Tea.
Tea cultivation in northern Iran has a long history, with Lahijan Tea, stemming from the city of Lahijan, in the northern Gilan Province, is still renowned in the country. The annual demand for tea in the Iranian market is approximately 100,000 tons. Domestic producers have the capacity to produce 25,000 to 30,000 tons annually, which accounts for one-fourth of the market demand. State statistics indicate that after Ebrahim Raisi’s administration took office, tea imports to Iran reached 80% of the consumption market. This figure indicates Iran’s increased dependence on foreign exports.
#Iran News in Brief
Amidst efforts by the Raisi government to distance itself from a multi-billion-dollar #corruption case involving Debsh tea imports, recent revelations shed light on the explicit involvement of Javad Saadatinejad, the former Minister of Agriculture of Ebrahim… pic.twitter.com/75Bx0ujxBD— NCRI-FAC (@iran_policy) December 11, 2023
Sadegh Hassani, the executive director of the Northern Tea Factories Syndicate, revealed in March that uncontrolled tea imports were causing losses for domestic factories. He also highlighted the inability of these factories to pay the price for greenleaf tea to the Tea Organization. Hassani pointed out, “This has led to an unprecedented event where 105 billion tomans of tea farmers’ demands from the Tea Organization have been postponed from 2023 to 2024.”
Regarding the corruption scandal involving the Debsh Tea Company, whose managers have yet to be prosecuted, Hassani commented, “As a result of the violations committed by the Debsh Tea Company, tea imports have significantly exceeded the average annual amount.”
Sri Lankan tea is the main type of imported tea to Iran. The Iranian regime has been among the top 10 importers of Sri Lankan tea in the past few decades. Its imports reached close to 40,000 tons.
Despite its assurances, the Sri Lankan government persistently sends Iran its poorest quality tea. Masoud Daneshmand, a member of the Chamber of Commerce, highlighted in December 2021: “Rather than settling its oil debt with Iran, Sri Lanka ships us grade 2 and 3 tea, which lacks demand in the global market. They disguise it as grade 1 tea, leaving us with no choice but to accept it.”
To bypass international economic sanctions, the Raisi administration has turned to barter transactions. These dealings were targeted at countries that were purchasers of Iranian oil and energy. Among these arrangements, Sri Lanka stands out, having entered into a barter agreement with the regime and currently owing $251 million in oil debt.
Record $3.7B Embezzlement Scandal Shakes #Iran’s Tea Industry, Revealing Deep #Corruption and Production Consequenceshttps://t.co/9FaxkCSvFj
— NCRI-FAC (@iran_policy) December 6, 2023
The Sri Lankan government, facing a severe shortage of foreign exchange, has so far refused to repay its debts to Iran. As a result, it sees exporting tea to Iran as a means of compensation. Hashem Ashjaazadeh, the regime’s ambassador to Sri Lanka, remarked, “If we hadn’t pursued this strategy, Sri Lanka would likely have postponed repayment of its $251 million oil debt to Iran indefinitely.”
The barter agreement between the Iranian regime and Sri Lanka, exchanging oil for tea, was finalized in December 2021. However, the delivery of tea to Iran was delayed due to economic crises in Sri Lanka, which also led to the departure of the then-President Gotabaya Rajapaksa. In 2023, Sri Lanka received a $2.9 billion financial aid package from the International Monetary Fund (IMF).
Following the IMF aid, Sri Lanka’s export of Ceylon tea to the Iranian market saw a resurgence. In early March 2023, the Prime Minister’s Office announced that, following discussions with the regime’s Foreign Minister, $20 million worth of tea had been exported to Iran as per the agreement. Initially, it was agreed that $5 million worth of Sri Lankan tea would be exported to Iran monthly. However, due to the urgency of the Raisi government to settle its oil debt, Sri Lankan media reports indicated that this amount increased to $10 million per month.
As a result, domestic tea producers incurred losses and damages. Sadegh Hassani, the executive director of the Northern Tea Factories Syndicate, reiterated his warning in December 2023, stating, “Thousands of tons of Sri Lankan tea have been imported into Iran in just a few months.” He once again cautioned that tea imports have harmed domestic tea producers rather than facilitating the settlement of the oil debt.