India makes inroads into Sri Lanka under China’s long shadow

COLOMBO/NEW DELHI, Dec 27 (Reuters) – As Sri Lanka plunged into its worst economic crisis in seven decades, sparking deadly riots and alarming shortages of fuel, food and medicine earlier this year, its giant neighbor on the north came to pass.

India provided about $4 billion in rapid assistance between January and July, including lines of credit, a currency swap deal and deferred import payments, and sent a warship carrying essential medicines for India’s 22 million people. the island.

Now, as Sri Lanka nears a $2.9 billion loan deal from the International Monetary Fund (IMF) and its economy stabilizes, India is seeking ambitious long-term investment, with a view to countering the influence of China, a regional rival. said the government minister and three sources.

“What we are seeing right now is investment from them,” Sri Lankan Foreign Minister Ali Sabry said in an interview this month, referring to a range of projects worth more than $1 billion that are currently being discussed and would help strengthen India’s presence in Sri Lanka. “They are willing to invest as much as it takes.”

“India is probably looking at that strategically… because of its security concerns,” Sabry said.

India’s Foreign Ministry did not respond to questions from Reuters about its strategic plans and goals in Sri Lanka.

Regional security would always be a focus for New Delhi, a source with knowledge of the matter told Reuters, at a time of ongoing friction with China along its Himalayan border.

“There’s no two ways when it comes to security concerns,” said the source, who asked not to be named due to the sensitivity of the issue. “In terms of long-term commitment, what is being focused is the investment.”

Apart from seeking Indian investment to establish power and renewable energy projects in the north of the island, Sri Lanka is also interested in working with New Delhi on expanding and developing the northeastern Trincomalee port into a major port, several said. officials.

Taking advantage of northern Sri Lanka’s proximity to India, these projects could help New Delhi balance China’s sprawling infrastructure projects in the south of the island that have been built over the past 15 years.

Tamil-dominated northern Sri Lanka also shares ethnic ties with the southern Indian state of Tamil Nadu.


The talks, and the scale of Indian aid this year that far exceeds that of other donors, underline New Delhi’s efforts to regain its influence on the island located just a few miles from its southern tip along the busy waterways linking Asia with Europe.

In late June, a fortnight before tens of thousands of angry Sri Lankans took to the streets and forced President Gotabaya Rajapaksa to flee the country, India’s top diplomat flew to Colombo, the island nation’s main city, to get together.

Foreign Secretary Vinay Kwatra, who was accompanied by officials from the Indian Ministry of Finance, met with Rajapaksa and Prime Minister Ranil Wickremesinghe, among others.

In their talks with Sri Lankan leaders, Kwatra and other Indian officials pointed to China’s position as a key geopolitical concern, according to a Sri Lankan government source with direct knowledge of the discussions.

The source, who declined to be named because he was not authorized to speak to the press, said China’s huge role in the island’s economy, which had skyrocketed under previous Rajapaksa administrations, was worrying India more than anything else.

Details of the June meeting have not been previously reported.

Kwatra and the foreign ministries of India and Sri Lanka did not respond to questions from Reuters about the June meetings.

In a statement issued immediately after Kwatra’s visit, India’s Foreign Ministry said the talks had mainly focused on economic issues, including deepening investment. He did not mention China.

New Delhi has long been concerned about Chinese influence in its neighborhood, including Nepal, Bangladesh and Sri Lanka. Sensitivities have heightened and diplomatic relations have frayed since Indian and Chinese troops clashed along a remote Himalayan border in 2020, leaving dozens of soldiers dead.

“We understand that it is your prerogative to ensure their safety,” Sabry said, referring to India. “And as far as Sri Lanka is concerned, we don’t want to contribute to any escalation of tension between any country.”

Meanwhile, China has pledged to the Sri Lankan government on the debt restructuring required for the IMF deal to go through, as well as sending shipments of medicines, fuel and rice.

The World Bank estimates that Beijing’s loans amount to around $7 billion, or 12% of Sri Lanka’s $63 billion external debt.

“We are ready to work with relevant countries and international financial institutions to continue to play a positive role in helping Sri Lanka,” China’s Foreign Ministry said in response to written questions from Reuters.

The ministry said it had no details of India’s assistance and investment in Sri Lanka and that its own support for Sri Lanka “was not directed at third parties”.


Sri Lanka plunged into a financial crisis after the COVID-19 pandemic decimated tourism and remittances from citizens working abroad plummeted. The war in the Ukraine caused the prices of imports, particularly fuel, to rise considerably.

The Rajapaksa administration also resisted IMF aid, which meant declining foreign exchange reserves, worsening fuel and medicine shortages.

Violent protests broke out as tens of thousands of people took to the streets and stormed government buildings.

The president fled the country in July and resigned. By then, Sri Lanka had finally made a commitment to the IMF, and the two sides have since reached a preliminary loan agreement of $2.9 billion.

But it was the Indian assist that helped Sri Lanka gain time.

“Without India, Sri Lanka would have collapsed like Lebanon did,” said Uditha Devapriya, chief international relations analyst at Factum, a Colombo-based foreign policy think tank.

“Sri Lanka has clearly benefited from being the closest neighbor to the most powerful country in the region. It is also in India’s interest to ensure stability in its backyard.”

In October, Wickremesinghe, who became president in July after Rajapaksa resigned, unveiled a plan for Trincomalee, which has a natural deep-water port, including a proposal to work with India to develop a strategic port there, as well as to establish a new industrial zone and energy center, according to details released by his office.

India and Sri Lanka are also in preliminary discussions on an undersea cable to connect the two countries’ power grids and a fuel pipeline from southern mainland India to northern Sri Lanka, projects that together could cost at least $4. billion, according to officials on both sides. .

In the energy sector, India’s state-run NTPC is working on a 100-megawatt solar power plant in Sampur, in Trincomalee district, after the two countries signed an agreement in March.

In northwestern Sri Lanka, India’s Adani Group is awaiting regulatory approvals for two $500 million worth of wind power projects in the Mannar region, Sri Lankan Energy Minister Kanchana Wijesekera has said. said in august.

Off the northwest coast, ONGC Videsh Limited (OVL), the overseas arm of the state-run Delhi Oil and Natural Gas Corporation, has been eyeing exploration licenses and has had multiple discussions with Sri Lankan authorities that They are finalizing regulations before inviting bids from global companies, two Sri Lankan energy ministry officials said.

Both asked not to be named because discussions were ongoing.

Adani, NTPC and OVL did not respond to questions from Reuters about their projects in Sri Lanka.

The push for oil and gas exploration was part of the discussions in June, the source with knowledge of the talks said.


Foreign Minister Sabry said the Sri Lankan government was interested in capitalizing on India’s growing economic prowess, particularly through renewable energy and infrastructure projects, while maintaining key relationships with other major allies, including China and Japan.

Despite India’s recent goodwill in Sri Lanka, New Delhi is wary of China’s presence.

In July and August, regional rivals became embroiled in a diplomatic dispute over a Chinese military reconnaissance ship, Yuan Wang 5, which stopped at the southern Sri Lankan port of Hambantota.

At the time, India’s Foreign Ministry spokesman Arindam Bagchi said that although India had provided “unprecedented” support to Sri Lanka during the economic crisis, New Delhi would not back down on its security needs.

Despite India’s crucial help during this year’s financial crisis, Sri Lanka still needs China, one of its biggest creditors, to agree to a debt restructuring plan, along with India and Japan, to close the loan deal. from the IMF, Sri Lankan officials said.

“Chinese investment is very important, the Chinese relationship is very important,” Sabry said.

“So I don’t think India or anybody expects Sri Lanka not to work with China. To be fair to them, none of them have asked us.”

Reporting by Uditha Jayasinghe and Devjyot Ghoshal; Edited by Mike Collett-White and Raju Gopalakrishnan

Our standards: The Thomson Reuters Trust Principles.

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