Sri Lanka will sidestep US led sanctions against Iran by diverting its oil payments towards a water management project that Tehran is funding in the island.
Mr Ivan de Silva Sri Lankan water resources secretary said that PKR 2 billion owed to Iran for oil will be used to finance the Uma Oya irrigation scheme. Iran had pledged some $450 million for the water project in 2008 but implementation had been delayed due to lack of cash.
Mr Silva said that "Because of the US sanctions there is a delay in transferring funds from Iran to Sri Lanka. Both governments had agreed to the deal.
The US led sanctions aimed at spurring Tehran to abandon its civilian nuclear program have hurt Sri Lanka which is geared to refine only Iranian light crude.
Sri Lanka imported 92% of its crude oil from Iran before the sanctions began earlier this year. Tehran insists its nuclear program is only for civilian use and refuses to abandon its uranium enrichment activities.
