Sanctions on Iran cause drop in Sri Lankan tea prices
2012-10-30

COLOMBO, Oct. 30 (Xinhua) -- Sri Lankan tea typically exported to Iran has come under strain as prices dropped this week causing concern for the industry, a broker said in a statement Tuesday.

According to tea broker John Keells Ltd., averages have been plummeting steadily from 452 rupees (3.50 U.S. dollars) per kilo at sale in late September to 407.31 rupees (3.20 U.S. dollars) at the recently-concluded sale in mid-October, which reflects a drop of 45 rupees (0.30 U.S. dollars) in four sales. "High priced Tippy teas which feed the Iranian market have come under severe strain with prices dropping significantly in comparison to the Leafy teas,"the produce broker said.

It was reported that the European Union which met in Brussels on Oct. 15 had decided to enforce further financial and trade sanctions on Iran with the exception for humanitarian trade.

In addition to the extensive trade and financial sanctions already in place, the new sanctions will add more pressure on the Iranian economy.

Iran is one of Sri Lanka's largest buyers, which together with the Middle East account for 60 percent of tea exports.

John Keells said tea imports to Iran are expected to continue at least during the current winter months, but with the local currency recording a sharp fall in value, customers will be compelled to pay higher prices as importers will find it difficult to acquire letters of credit and transfer of funds.

"The situation in Syria remains another area of concern, particularly for the Low Grown Leafy teas, which have also not fared too well. Given the present scenario, the immediate prospect for a quick turnaround does not look promising," it added.

Sri Lanka earned 1.49 billion U.S. dollars from tea exports last year.