US to permit continued trade between Sri Lanka and Iran

Economic downturnThe United States has agreed to permit continued trade and economic engagement between Iran and Sri Lanka following bilateral discussions with visiting Secretary of State John Kerry.

Concessions permitting continued trade with Iran were said to have been granted following representations made by the Sri Lankan Government in relation to the severe burden such embargos had placed on the national economy, according to Deputy Minister of Foreign Affairs Ajith P. Perera.

Consequently, Sri Lankan exports of tea and imports of Iranian crude oil will be allowed to continue once relevant approvals have been finalised.

The last round of American sanctions against Iran came into effect mid-2012 in response to unproven allegations of “continued illicit nuclear activities” on the part of Iran. The sanctions which attempted to freeze all transactions involving the Iranian Central Bank caused severe difficulties for Sri Lankan imports of crude oil at a time when 93% of Sri Lanka’s crude oil supplies were sourced from Iran.

At the time the sanctions came into place, Iran also stood as the second largest importer of Sri Lankan Tea, another factor which adversely impacted export performance. Despite the 2012 sanctions however Iran continued up to the present day as one of the largest export destinations for Sri Lankan tea.

The American position on Iran has since softened following historic negotiations between the two nations and Britain, France, Germany, Russia, China and the European Union related to the peaceful development of Iranian nuclear technology which have been running for the past 18 months and are expected to resume in Vienna next week.

Despite unprecedented progress on nuclear talks, the United States has nevertheless cautioned that any breach of the agreement on the part of Tehran will result in what negotiators have termed a ‘snapback’ in sanctions, a situation which is likely to once again create downside risks for the Sri Lankan economy. (Daily FT)

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