Sri Lanka sees tea, BoP gains from Iran nuclear deal
ECONOMYNEXT – A nuclear deal between Iran and world powers could lead to more demand for Sri Lankan tea and ease pressure on the balance of payments as resumption of Iranian oil exports reduce crude prices, officials said.
"This is something we were looking forward to. I’m sure it will help in trading and importing and have a very favourable impact on Sri Lanka," Finance Minister Ravi Karunanayake said.
"We can expect higher tea prices, lower oil prices and benefits will be passed on to manufacturers, importers and the consumer.
”It will help us with balance of payments, strengthen the rupee and in reducing inflation further.”
But Karunanayake told reporters the effects of the deal would only be felt towards the end of the year as it has to be passed by the United States Congress.
Iran finally struck a deal with world powers on Tuesday after almost two years of talks, paving the way for the eventual lifting of sanctions on Iran in exchange for curbs on the Islamic nation’s nuclear program.
Tea industry officials said the lifting of sanctions on Iran’s banks will make it easier for Iranian buyers to pay for food imports.
“We’re optimistic that the progressive removal of sanctions on Iran will start with banks so food commodities including tea can move into the country,” a trade source said.
“Tea is a food commodity so there is no legal barrier to importing tea into Iran but sanctions on Iranian banks have caused a ripple effect on tea imports – that’s been the biggest problem,” he added.
“They can’t import food because they can’t pay for food since banks can’t transfer money.”
But the impact on Sri Lanka’s crude oil imports is likely to be limited as the Ceylon Petroleum Corporation (CPC) refinery is now importing different crudes from other origins.
CPC chairman Ranjith Wickramasinghe said the Iranian nuclear deal will not have much of an impact on the 50,000 barrels-per-day refinery.
“Our requirements have changed. We’ve now shifted to crude from Abu Dhabi.”
The ban on Iranian oil exports initially badly affected the CPC as its Sapugaskanda refinery, on the outskirts of Colombo, is optimised to refine Iranian crude. (Colombo/July 15, 2015)