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Indian tea exporters cheer exemption from American sanctions on Iran

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Tea producers and exporters, after a dip in tea prices of more than 7%, anticipate a rebound in demand for the orthodox tea variant as well as price recovery for exports to Iran after the US decided to exempt India from trade sanctions on the West Asian country.

After the US announced its plans to reimpose sanctions on Iran, Indian tea firms and exporters, wary of the situation, halted some of the shipments, Business Standard reported.

Although orthodox tea production dipped by an estimated 10%, prices did not firm up; exporters who had stocked tea or had entered into contracts with Iranian importers tried to clear the stocks at lower prices. Average price realisation from exports to Iran dipped by over 7% at $ 3.61/kg.

“During the peak season of orthodox tea cultivation (March-June), sanctions were announced, which caught tea companies off guard," said Indian Tea Association Chairman Vivek Goenka.

In 2011-12, after the Obama administration imposed trade sanctions on Iran, the Indian and Iranian Governments put in place the Indian rupee-Iranian rial payment mechanism, where up to 45% of India’s purchases of Iranian oil could be paid in Indian rupees, covering tea, rice, medicines and commodities not sanctioned by the UN.

“There was huge uncertainty on how payments would be made to India and thus, many shipments got stuck at the Kolkata warehouse. However, for two weeks, payments from Iran have started coming, which is restoring confidence,” said McLeod Russel, the world’s largest tea-producing company, Director Azam Monem.

At the Kolkata and Guwahati tea auctions recently, large quantities of Assam orthodox tea, mostly exported to Iran, had remained unsold.

Goenka, however, said that since mid-October, around 90% of orthodox tea put up for sale in the auctions had been sold.

“Exports to Iran are poised to increase in the coming days. Prices will also increase,” Camellia PLC-owned Goodricke Group Chief Executive Officer and Managing Director Atul Asthana said.

On the other hand, fearing US sanctions, some Indian companies had been routing exports to Iran via Russia, Azerbaijan, the UAE and other countries at a discounted rate.

Although trade between India and Iran, of $ 10.6 billion, mostly comprises oil imports, accounting for $ 8 billion, Indian exports — primarily tea and basmati rice — account for $ 2.6 billion. 


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