Sanctions make Iran biggest buyer of Indian tea

Sanctions push Iran past Russia as biggest buyer of Indian tea

Credit: Bloomberg

By Pradipta Mukherjee

Iran overtook Russia to emerge as the top buyer of Indian tea last year, after sanctions against the Islamic Republic halted imports other than specially negotiated deals.

India and Iran have been trading through a rupee-based bank account to bypass restrictions imposed by the U.S. While this bilateral trade has boosted imports of the Indian leaf at higher-than-normal prices, the outlook for orthodox teas is uncertain with even Lipton owner Unilever Plc weighing a sale of one of its best-known brands.

“This boost really has come because of the rupee-rial trade arrangement that we have had with Iran,” said Azam Monem, a director at McLeod Russel India Ltd., which is among the nation’s largest tea exporters. “India’s diplomacy should allow us to remain a partner to Iran where we supply humanitarian aid, tea and rice.

Iranian Imports:

  • Iran imported 53.5 million kilograms of tea from India last year, a rise of 74% from 2018
  • The price per kilogram for Iranian purchases rose to about 276 rupees ($4) from 255 rupees, data from India’s Tea Board show
  • Russian shipments dipped 3% to 46 million kilograms 

India also saw a 30% increase in shipments to China, the world’s biggest producer of tea, due to rising demand in the green-tea-drinking nation for India’s black-tea brands. Indian leaves such as Darjeeling, Assam and Nilgiri are used in processing the ready-to-drink milk tea popular across Asian nations.Overall, Indian exports dropped 3% to 248 million kilograms last year as bad weather hit production in the crucial months of June and July. Prices rose 8.5% to 226 rupees per kilogram.

However, India’s tea industry faces headwinds in controlling costs, after an increase in wages last year. Prices are unlikely to rise in 2020 unless consumption surges, according to Vivek Goenka, chairman of the Indian Tea Association.

“Any material increase in wage rates in the new season, without a substantial increase in tea prices, would prolong the stress,” said Kaushik Das, an analyst at Icra Ltd.

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