India might revive tea exports to Iraq as sanctions on trade with Iran loom

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(Image source- Reuters)

  • Over the course of 2018, India’s tea exports to Iran, its second largest export market for tea, have declined considerably because of the uncertainty over the imposition of trade sanctions by the US.
  • Amid this uncertainty, India could tap an old trading partner to offset the slowdown in tea exports to the Middle East: Iraq.
  • The move has been in the works since July, but likely gained momentum following a recent visit to Iraq by representatives from the Trade Promotion of Council of India.
Over the course of 2018, India’s tea exports to Iran, its second largest export market for tea, have declined considerably owing to uncertainty over the imposition of trade sanctions by the US. This has probably led to an excess of supply, given India’s status as the one of the largest producers of tea this year.

India’s tea exports have remained flat at 173.80 million kgs between January and September 2018, partly owing to a decline in shipments to Iran. Amid this uncertainty, India could tap an old trading partner to offset the slowdown in tea exports to the Middle East: Iraq.

The move has been in the works since July, but likely gained momentum following a recent visit to Iraq by representatives from the Trade Promotion of Council of India. Sujit Patra, the secretary of the Indian Tea Association told ET that buyers in four cities - Baghdad, Erb, Najaf and Karbala - had expressed interest in sourcing tea from India.

India’s exports of tea to Iraq burgeoned in the first decade of the 21st century, despite the US occupation of the country. However, they came to a standstill after 2013-14, when around 50 million kgs were exported, as the conflict with Islamic State and regional tensions reached a fever pitch. Between 2006 and 2008, Iraqi importers also defaulted on their payments which hit the trading relationship.

After India halted exports, Iraq ramped up its tea imports from Vietnam and Sri Lanka. In fact, Sri Lanka reportedly fulfills 80% of Iraq’s tea imports - a market share that India could soon muscle in on.

India’s tea is said to be slightly more expensive than Sri Lanka’s. However, Patra explained that this wouldn’t be an issue as the importers he met were reportedly prepared to pay a premium for “higher quality” orthodox teas. This is good news for India’s tea manufacturers, especially as they deal with increasing labour costs at home.

The timing for the revival in tea exports to Iraq is momentous. As opposed to in the past, when the government sourced low-quality brews, purchasing privileges have now devolved to private players, who are looking to buy more high-quality tea. The Indian government is also preparing a policy to boost exports of agricultural commodities by improving shipping infrastructure and removing quota and minimum price restrictions.


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