Sanctions to affect India’s tea exports to Iran

Sanctions to affect India’s tea exports to Iran

FPJ BureauUpdated: Wednesday, May 29, 2019, 05:27 AM IST
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New Delhi: New sanctions on Iran, once again by the US, have been brewing storm in energy markets for the past few months. And while the buzz is all about crude oil, Indian tea exporters too are a worried lot, for Iran is a key market for them. While tea exports are likely to be left out of the purview of the sanctions, shipping lines would not have the same immunity, exporters said. Exporting a 20-tonne container of tea to Iran now costs USD 1,800-2,000, compared with USD 1,400 before the sanctions were announced, they added. The next round of US sanctions targeting Iran’s oil sector are set to kick in from November 5.

Iran is the second-largest tea export market for India, after Russia. It is also a major buyer of orthodox tea, which commands a premium over the ‘crush, tear, curl’ variety, popularly known as CTC.  While the individual data for August isn’t available, India’s tea exports to Iran, which were up 5.3 per cent for April-July, went into a contraction of 8 per cent in April-August. The impending round of sanctions on Iran is not likely to affect trade in some goods such as food, pharmaceuticals and other essential products, which have been exempt on humanitarian grounds, and tea is a part of that basket, Indian Tea Association Chairman Azam Monem said.

A senior official at the commerce ministry agreed. “Food and humanitarian products are still going in (to Iran)…so, they should get exemption and tea exports should not be an issue.”  Sellers have also been hit by the sharp depreciation in the Iranian rial, which has slowed payments. The Iranian rial hit a record low of 190,000 against the US dollar towards the end of September, according to Iran-based Tasnim News Agency.

“A lot of containers are lying in the port, local currency (of Iran) has been badly affected,” an official with Asian Tea Exports Ltd said. “We are not getting the payments from Iran. More than 500 containers are lying in the Bandar Abbas port. This is really affecting us in a big way…The recent update is that they have agreed to take containers which are lying in the destination port. They will be making the payments for those containers only. So, there can be some movement,” an official with a Kolkata-based exporter said. The fall in the rial has also hit demand for imported goods, including tea.

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