International

Sri Lanka: A Battle Ground For Influence

Sri Lanka is a small island nation in South Asia. A country of 2.2 million people that lies in the Indian Ocean, separated from the Indian Peninsula by the Gulf of Mannar and the Palk Strait. Though Sri Lanka has been a melting pot of various cultures, it has also witnessed an era of brutal civil war and political instability. Sri Lanka’s ethnic civil war between majority Sinhalese and minority Tamil rebels never let Sri Lanka exploit its potential. This civil war between the Sri Lankan Army and Tamil rebels demanding a separate nation lasted for 26 years. Sri Lanka was drained economically, culturally, and politically during this brutal era of ethnic clashes (1983-2009). Today, Sri Lanka is witnessing its worst economic crisis coupled with political instability. Though it never excelled economically and relied on foreign loans for development projects, today things are far worse.

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Protestors storming presidential house.

A fragile economy burdened by foreign loans was hit hard by a pandemic that devasted its tourism industry. Sri Lanka heavily depends on the tourism sector as it accounts for 12% of its GDP. The COVID pandemic proved to be the last nail in the coffin for an already cash-crunched nation. Poor economic policies followed by the pandemic resulted in shrinking foreign reserves, record inflation of 64%, and widespread unemployment. This culminated in public resentment and violent protests against the corrupt Rajapaksha government throughout the nation. These violent protesters surrounded government institutions and even the president’s and prime minister’s houses. As a result, President Gotabhaya Rajapaksa and PM Mahendra Rajapaksa fled the country. Sri Lanka, witnessing political collapse and anarchy with foreign reserves of less than $2 billion, finally declared bankruptcy.

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INDIA – CHINA: A BATTLE FOR INFLUENCE

Historically, small nations with political instability and economic crises have often become battlegrounds for other major powers. Sri Lanka is no exception, witnessing a fierce battle for influence between India and China. India, being its northern neighbor, has historic cultural ties dating back to the era of Ramayan. India enjoys a deep people-to-people bond with Sri Lanka and has always been a helping hand during crises. China, on the other hand, is one of its major creditors, as Sri Lanka is a signatory to China’s Belt and Road Initiative. On the one hand, while India provided massive financial assistance and lines of credit to Lanka, China provided unsustainable loans at exorbitant interest rates. For China, Sri Lanka is nothing but a fragile state that is currently trapped in its debt trap.

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According to some estimates, China accounted for about 10% of Sri Lanka’s foreign debt. Through loans, China gained leverage over Lanka, which is a national security threat to India. Given India’s proximity to Sri Lanka, it could not afford to lose the island to China. Therefore, India took several measures to push back Chinese influence in the island nation. China’s being a long-term strategic threat to India makes it crucial for India to take on Chinese influence in Sri Lanka. The following three examples will help you understand this battle of influence.

HAMBANTOTA PORT

Hambantota Port is a deep-water port located at the southern tip of Sri Lanka. It is also known as Magampura Mahinda Rajapaksa Port. This port is strategic in nature, given its geographic location. It is situated between the lucrative shipping routes of the Malacca Straits and the Suez Canal, linking Asia and Europe in the process. This port is also a part of China’s “string of pearls” doctrine to contain India in the region. This was the reason why, despite knowing that this port is not economically feasible, China gave loans at exorbitant rates to Lanka. In 2017, Sri Lanka signed a $1.1 billion deal to sell a 70% stake in the strategic Hambantota port to China. This was a nightmare for Indian policymakers, as now China can get direct access to India’s backyard. Moreover, this port can be exploited by the Chinese Navy against India.

HAMBANTOTA PORT VIEW

HAMBANTOTA PORT

Under the 99-year lease agreement, the stake in the port has been sold to China’s state-run conglomerate, China Merchant Port Holdings (CMPort). Though India raised several security concerns, Sri Lanka assured India that it would never allow Hambantota Port to be used against Indian interests. But all these assurances proved to be as futile and fragile as the Lankan economy. Recently, on August 16, Sri Lanka allowed a Chinese “spy ship,” Yuan Wang 5, to dock at Hambantota port. This happened despite India and the U.S. voicing concern with Colombo over the military ship’s visit.

YUAN WANG 5

SPY SHIP YUAN WANG 5

India raised its concerns as China’s satellite tracking vessel, Yuan Wang 5, can track and record several Indian key installations. With an aerial detection range of 750Km, India’s nuclear power stations at Kalpakkam and Koodankulam, as well as six ports in southern India, are in danger of being “snooped upon. Initially, due to India’s strong protest, Sri Lanka requested China to postpone its visit. Everything looked sorted, but in reality, Wang 5 didn’t change its course and finally docked at Hambantota despite Sri Lanka’s request. China took advantage of Sri Lanka’s debt trap and forced it to dance to its tune, ignoring Indian interests. This was an eye-opener for India. In its defense, Lanka claimed that the ship was allowed to dock only when all the radars and sensors were disabled. But this incident alerted policymakers in the South Block.

COLOMBO PORT CONTAINER TERMINAL

After the Hambantota fiasco, Indian policymakers aimed to curb the growing Chinese influence in Sri Lanka. They aimed to acquire the Eastern Colombo Port Container Terminal (ECT). Colombo Port is an economically and strategically vital asset as it is one of the most preferred regional hubs for the transshipment of Indian containers and mainline ship operators. Around 45% of Colombo’s transshipment volumes originate from or are destined for Indian ports. Another advantage of this port terminal is its proximity to the Hambantota Port. This step would give India an edge over China, as India could easily counter any Chinese advance against it. In May 2019, India and Japan signed a memorandum of cooperation with the state-owned SLPA to develop the ECT during the Sirisena government. Under the agreement, India and Japan will buy a 49% stake in the ETC, while the remaining 51% will be owned by SLPA.

COLOMBO PORT LAYOUT

COLOMBO WEST TERMINAL

This agreement was opposed by China-backed Colombo Port trade unions. They demanded that the ECT remain 100% owned by the SLPA as opposed to the current 51%. Under pressure, Prime Minister Mahendra Rajapaksa scrapped the deal. It was a major blow to India and a victory for China. India remained persistent throughout its diplomacy and finally managed to clinch a much sweeter deal. In October 2021, India’s Adani Group signed a deal with the Sri Lanka Ports Authority (SLPA) to develop and run the strategic Colombo Port’s Western Container Terminal. Under the deal, Adani Group will have a 51% stake in the port’s Western Container Terminal (WCT). This was a significant comeback for India on the island nation.

TRINCOMALEE OIL TANK FARM

The Trincomalee oil tank farm is a British-built refueling station from WWII. It is a strategic asset as it is located in China Bay. Its close proximity to the internationally coveted deep-water natural harbor of Trincomalee makes it even more valuable. It comprises 99 storage tanks with a capacity of 12,000 kiloliters each. In 1987, India and Sri Lanka signed the Rajiv-Jayewardene Accord, which included a proposal for its joint development. In 2003, the Indian Oil Corporation set up its Sri Lankan subsidiary, called Lanka IOC, to work on this oil farm. But later, everything went on the back burner, with both countries busy handling other issues. Finally, after Chinese belligerence and growing influence in Sri Lanka, India decided to revive this strategic project. This 850-acre project will give India a grip on the north-western coastal region of Sri Lanka.

Sri lanka OIL TANK FARM
TRINCOMALEE OIL TANK FARM.

Eventually, after a hiatus of 30 years, on January 20, 2022, India and Sri Lanka inked the Trincomalee oil farm deal. Under the agreement, Lanka IOC will acquire 49% of the joint development and Lanka’s Ceylon Petroleum Corporation will keep 51%. Out of 99 tanks, 24 will be allocated to the Ceylon Petroleum Corporation (CPC) and 14 to Lanka IOC. The remaining 61 tanks will be developed under Trinco Petroleum Terminal Pvt. Ltd. with shares of CPC (51%), LIOC (49%), and others. By securing this deal, India not only secured a strategic fuel storage facility abroad but also increased its influence in the energy sector of Sri Lanka. This deal delivered another major jolt to China as India secured another strategic asset in the island nation. For India, it was crucial to balance Chinese influence in the region and to break China’s string of pearls around its neck.

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Anmol Kaushik

Hi, I'm Anmol Kaushik, I'm currently pursuing Law (3rd year) at Vivekananda Institute of Professional Studies (GGSIPU). I'm a defence enthusiast and a keen geopolitical observer.

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