Sri Lanka is unlikely to pursue new barter trade arrangements in the foreseeable future as its tea-for-oil agreement with Iran approaches completion, with the Sri Lanka Tea Board citing exporters’ liquidity concerns, bureaucratic delays and limited commercial interest in government-managed exchanges.
“It is highly unlikely that Sri Lanka will pursue new barter trade arrangements in the foreseeable future. Should the need arise, any such opportunities would have to be explored in consultation with the export community,” Sudharma Karunarathna, director of promotion at the Sri Lanka Tea Board (SLTB), told local media.
Under the agreement, signed in December 2021, Sri Lanka has exported approximately $235 million worth of Ceylon Tea to Iran, with a remaining balance of $15 million set aside for final reconciliation. The arrangement was established to settle an outstanding debt of approximately $250.9 million owed by the Ceylon Petroleum Corporation (CPC) to Iran.
The scheme enabled Sri Lanka to settle the liability while bypassing international banking restrictions and avoiding a formal default. However, its implementation placed financial and administrative burdens on State institutions and tea exporters.
Under the payment mechanism, the CPC reimbursed the Tea Board in local rupees through monthly instalments capped at the equivalent of $5 million. The process generated administrative delays and bureaucratic bottlenecks, leaving exporters waiting for extended periods to recover working capital tied up in shipments.
The Tea Board has also examined whether tea exports could be used to settle outstanding liabilities for Russian aircraft overhaul services, potentially avoiding US and Western sanctions. However, the proposal failed to attract sufficient interest from the tea export community.
K arunarathna said Sri Lankan exporters already had functioning commercial settlement channels with Russian buyers, largely through non-sanctioned financial institutions or secondary trade hubs. These existing arrangements reduced the commercial incentive to replace open-market sales with a more complicated, State-managed barter system.
“Given the substantial bureaucratic drag of bilateral clearing and the private sector’s clear reluctance to absorb liquidity bottlenecks, Sri Lanka is unlikely to adopt barter models with other trading partners in the tea sector unless absolutely necessary,” he said.
The Tea Board’s position favours conventional commercial settlement over government-to-government exchanges, which can provide an alternative when financial restrictions obstruct payments but may create cash-flow difficulties and lengthen the time exporters take to receive funds.
The policy shift comes as Sri Lanka’s tea export earnings remain above $1 billion but have declined in dollar terms amid falling shipment volumes and changes in key export markets.
Customs data analysed by Siyaka Research show that tea export earnings reached approximately $1.083 billion between January and September 2026, compared with $1.163 billion during the same period a year earlier. Export volumes fell by 4%, from 198.3 million kg to 189.4 million kg.
Rupee earnings nevertheless increased to Rs.350 billion from Rs.347 billion, largely because of the depreciation of the rupee against the US dollar. Value-added products, including packets, teabags and instant tea, continued to account for approximately 58% of total tea exports.
Amid continuing turmoil in the Middle East, shipments to and through Turkey rose by 134% to 35.7 million kg. Exports to Iraq, traditionally a major buyer, declined to 18.4 million kg from 30 million kg, while shipments to Libya fell to 6.6 million kg from 15.9 million kg.
Russia maintained shipments of 16.9 million kg, while exports to Azerbaijan increased by 34% and those to Jordan by 51%. Chile, which recorded a five-year high in tea imports last year, saw shipments from Sri Lanka fall to 6.3 million kg from 8.5 million kg.
