By R R M Lilani
Sri Lanka’s President and Prime Minister’s brother, Basil Rajapaksa, who took over as Finance Minister in July this year, swayed Sri Lanka towards India, realizing that India is the saviour in bailing Sri Lanka out of its current financial crisis.
Since taking office as Finance Minister, Rajapaksa has made it a priority to halt some of the country’s dealings with China and has struck many strong bilateral agreements to help Sri Lanka.
Recently, the Chinese Embassy in Colombo tweeted that the three hybrid solar energy power projects in the three Northern Province islands had been suspended due to a ‘third-party’ intervention. The third party, according to the tweet, was India.
Although China claimed that the “Sino Soar Hybrid Technology” had suspended the construction of hybrid energy systems in three northern islands due to security concerns of another country, i.e. India, Colombo denied that the project had been suspended.
When China saw that Sri Lanka was leaning towards India, it issued such an official statement to stir up emotions, despite the fact that no such decision had been taken.
However, India warned Sri Lanka not to hand over the projects to China because the islands where the hybrid systems were to be installed were geographically closer to India.
Minister of Fisheries Douglas Devananda hopes that the three island hybrid energy projects will be offered to India to avoid geopolitical tensions. He has also assured the Indians that the project will be given to them, but the Cabinet of Ministers are deafeningly silent.
China’s stronghold in Sri Lanka has dragged the country into the center of a geopolitical conflict involving India, China, and the United States.
India has accused Sri Lanka of inconsistent foreign policies and mood swings. The main reason for Basil Rajapaksa’s move to India was to alleviate the United States’ geopolitical concerns about China. The US and its allies, including India, have taken every precaution to limit China’s expansion in the Indo-Pacific regions that includes Sri Lanka.
In July 2021, the United States passed the Eagle Act, which includes provisions to strengthen US diplomacy in the strategically important Indo-Pacific region and deal with China’s challenges.
It is a well-known fact that the Chinese project in Sri Lanka has been quickly realized, with agreements signed between Sri Lanka and China, for example, but it comes with a high rate of interest.
In comparison to India, Japan, and the United States, China’s high interest rates have never been disclosed, nor has its memorandum of understanding with Sri Lanka been made public.
Today, many of the projects do not generate sufficient revenue for Sri Lanka, contributing to the country’s current foreign debt crisis. Loans are still being paid with interest on the Mattala airport, the Lotus Tower, the International Convention Center in Hambantota, and the Hambantota Port.
Recognizing the importance of close collaboration with other countries, the Finance Minister recently met with his Indian counterpart in New Delhi. Even Americans are urging Sri Lanka to be open to non-discriminatory investment from all countries.
The Finance Ministry also decided to award the Kerawalapitiya LNG project to New Fortress Energy of the United States. This project is ostensibly a Chinese venture.
Despite the protests of the Ceylon Electricity Board Engineers Union, Minister Basil Rajapaksa is adamant about handing it over to the US Company.
Indian Prime Minister Narendra Modi has been mindful of Sri Lanka’s mood swings and was disappointed over the cancellation of the East Container Terminal (ECT), which was earmarked for India. Today, to pacify China, the ECT has been awarded to China for a joint venture. This farsighted decision by Sri Lanka has been a core issue for India.
The Finance Minister had the opportunity to meet with India’s National Security Advisor, Ajit Doval. In October, Secretary of External Affairs Harsh Vardhan Shringla and Indian army chief General MM Narvane visited Sri Lanka and these visits have sent strong messages to Sri Lanka.
Furthermore, a joint exercise between the Indian and Sri Lankan armies, as well as a visit by six Indian Navy warships, demonstrated India’s ongoing interest in diversifying India-Sri Lanka relations.
The Indian government expressed its displeasure to the Finance Minister about Colombo’s recent failure to honour most of the State level agreements signed with New Delhi, according to local media. According to the Indian government, Sri Lanka has also failed to honour a number of recent agreements signed between the two countries.
However, Basil Rajapaksa’s visit to India resulted in many fruitful agreements, and both sides discussed a wide range of issues of mutual importance pertaining to the bilateral relationship, with a focus on economic cooperation. Both parties expressed satisfaction with the bilateral relationship’s evolving trajectory. During the discussions, they identified ways and means for the two countries’ existing bilateral economic relationship to be broadened and deepened, according to the Indian High Commission in Colombo.
Finance Minister Rajapaksa briefed the Indians on Sri Lanka’s economic situation and his government’s approach to dealing with post-covid challenges. At this critical juncture, the Indian Ministers expressed India’s solidarity with Sri Lanka. They reiterated that India has always stood by Sri Lanka and that its Neighbourhood First policy would be followed in the current situation.
In this regard, the two sides discussed four pillars for short and medium-term cooperation: Food and health security package on an urgent basis, involving the extension of a line of credit to cover the import of food, medicines, and other essential items from India to Sri Lanka; Energy security package, involving the extension of a line of credit to cover the import of fuel from India, as well as the early modernization of Trincomalee Tank Farm; Offer of a Currency Swap to assist Sri Lanka in addressing current balance of payment issues and facilitating Indian investment in different sectors.
India, which has previously been fully engaged with Sri Lanka, appears to be satisfied with the recent reentry. According to Indian economists, India’s comprehensive plan to free Sri Lanka from Chinese control may be a viable option for both Sri Lanka and India.
(RRM Lilani is freelance journalist and researcher based in Colombo. Writer can be reached on rrmlilani1@gmail.com )