By RRM Lilani
Sri Lankan President and brother of Prime Minister Basil Rajapaksa, who took over the finance ministry in July this year, swayed Sri Lanka to India, realizing India is the savior to get Sri Lanka out of its current financial crisis.
Since taking office as finance minister, Rajapaksa has made it a priority to end some of the country’s relations with China and has made many strong bilateral deals to help Sri Lanka.
Recently, the Chinese Embassy in Colombo tweeted that the three hybrid solar power projects in the three islands of the Northern Province have been put on hold due to a “third party” intervention. The third, according to the tweet, was India.
Although China has claimed that “Sino Soar Hybrid Technology” has suspended construction of hybrid energy systems in three northern islands due to security concerns in another country, namely India, Colombo has 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 has been made.
However, India warned Sri Lanka not to cede the projects to China because the islands where the hybrid systems were to be installed were geographically closer to India.
Fisheries Minister Douglas Devananda hopes the three island hybrid energy projects will be offered to India to avoid geopolitical tensions. He also assured the Indians that the project would be entrusted to them, but the cabinet of ministers is deafeningly silent.
China’s stronghold in Sri Lanka has pulled the country into the center of a geopolitical conflict involving India, China, and the United States.
India has accused Sri Lanka of inconsistent foreign policy and mood swings. The main reason for Basil Rajapaksa’s move to India was to alleviate US geopolitical concerns about China. The United States and its allies, including India, have taken all necessary precautions to limit China’s expansion into the Indo-Pacific regions which includes Sri Lanka.
In July 2021, the United States passed the Eagle Act, which includes provisions to strengthen U.S. diplomacy in the strategically important Indo-Pacific region and address challenges from China.
It is well known that the Chinese project in Sri Lanka has materialized quickly, with agreements signed between Sri Lanka and China, for example, but it comes with a high interest rate.
Compared with India, Japan and the United States, China’s high interest rates have never been disclosed, and its memorandum of understanding with Sri Lanka has never been made public.
Today, many projects do not generate enough income for Sri Lanka, which contributes to the country’s current external debt crisis. Loans are always paid with interest on Mattala Airport, Lotus Tower, Hambantota International Convention Center, and Hambantota Port.
Recognizing the importance of working closely with other countries, the Minister of Finance recently met his Indian counterpart in New Delhi. Even the Americans are urging Sri Lanka to open up to non-discriminatory investment from all countries.
The Ministry of Finance has also decided to award the Kerawalapitiya LNG project to New Fortress Energy in the United States. This project is ostensibly a Chinese enterprise.
Despite protests from the Ceylon Electricity Board Engineers Union, Minister Basil Rajapaksa is adamant about handing it over to American society.
Indian Prime Minister Narendra Modi was aware of Sri Lanka’s mood swings and was disappointed with the cancellation of the East Container Terminal (ECT), which was destined for India. Today, to pacify China, ECT has been awarded to China for a joint venture. This far-sighted decision by Sri Lanka has been a central issue for India.
The Minister of Finance had the opportunity to meet with Indian National Security Advisor Ajit Doval. In October, External Affairs Secretary Harsh Vardhan Shringla and Indian Army Chief General MM Narvane visited Sri Lanka and these visits sent strong messages to Sri Lanka.
In addition, a joint exercise between the Indian and Sri Lankan armies, as well as a visit by six Indian Navy warships, demonstrated India’s continued interest in diversifying Indo-Sri Lankan relations.
The Indian government has expressed its displeasure to the finance minister over Colombo’s recent failure to honor 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 honor a number of recent agreements signed between the two countries.
However, Basil Rajapaksa’s visit to India resulted in many fruitful agreements, and the two sides discussed a wide range of issues of mutual importance relating to bilateral relations, with an emphasis on economic cooperation. The two sides expressed satisfaction with the evolution of the trajectory of bilateral relations. During the discussions, they identified ways and means to broaden and deepen the existing bilateral economic relations between the two countries, according to the Indian High Commission in Colombo.
Finance Minister Rajapaksa briefed Indians on Sri Lanka’s economic situation and his government’s approach to dealing with post-covid challenges. At this critical moment, Indian ministers expressed India’s solidarity with Sri Lanka. They reaffirmed that India has always supported Sri Lanka and that its neighborhood policy first would be followed in the current situation.
In this regard, the two sides discussed four pillars for short and medium term cooperation: An emergency food security and health package, involving the extension of a line of credit to cover the import of food, medicines and other essentials 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 anticipated modernization of the Trincomalee storage farm; Offer currency exchange to help Sri Lanka solve current balance of payments issues and facilitate Indian investments in different sectors.
India, which was previously fully engaged with Sri Lanka, appears to be pleased with the recent reintegration. Indian economists say India’s comprehensive plan to free Sri Lanka from Chinese control may be a viable option for Sri Lanka and India.
(RRM Lilani is a Colombo-based freelance journalist and researcher. The writer can be contacted at [email protected])