9 May 2018

Kenya: U.S. Sanctions on Iran to Hurt Kenya Tea Sales

Photo: Daily Nation
Tea farmers (file photo).

Tea exports to Iran will most likely be hit by the fresh sanctions after US withdraw from a nuclear deal, coming just months after the Kenya led a marketing campaign to Tehran.

Some Sh120 million owed to local traders is stuck in the country and the situation may get worse after the six-month US window for firms trading in America to stop doing business with Iran closes.

President Donald Trump on Tuesday withdrew the US from the nuclear deal, just three years after sanctions were lifted following an agreement between Tehran and five western powers.

The move, Agriculture and Food Authority (AFA) says, will hit traders who export tea to the country as they will experience difficulties getting payments as no bank will be willing to transact business with Iran.

"We may not be able to export tea to that market because of the sanction. However, we are watching the market with caution," said AFA director- general Alfred Busolo.

The regulator, however, says payments made in euro are unlikely to be affected as European Union (EU) countries are not likely to follow suit.

"Payments for tea sold to Iranian companies will be difficult as the dollar is the dominant currency of trade. However, we note trade in the euro may not be directly affected as EU countries may not go the same way as the US," he said.

The lifting of the ban in 2016 allowed Kenyan banks to transact with Tehran and repatriate cash.

The local banks were allowed to transact business with Iranian lenders to facilitate payment, especially for tea traders. As of October last year, Iranian buyers owed local exporters the Sh120 million.

The International Atomic Energy Agency, which is the UN nuclear watchdog, in 2016 certified Iran as compliant with the July 2015 agreement on limiting nuclear development.

Kenya has been targeting Iran as one of the major buyers of its beverage and has since the lifting of the sanctions actively marketed its tea. In October last year, officials from the Tea Directorate visited the country in a marketing drive.

Iran normally gets the bulk of its tea from India and Sri-Lanka with Kenya supplying about 20 million kilogrammes of the 120 million kilos the besieged country imports annually.

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