Sri Lanka’s worst economic crisis in seven decades led to deadly riots, and alarming shortages of fuel, food, and medicine earlier in the year. It was then that its huge northern neighbor stepped in.
Between January and July India sent $4 billion of rapid aid, which included credit lines and deferred import payments. It also sent a warship with essential medicines for 22 million islanders.
As Sri Lanka is closing in on an IMF loan agreement worth $2.9 billion and the economy stabilizes, India seeks to make long-term investments with a view to countering China’s influence, according to a minister of the government and three other sources.
In a recent interview, Ali Sabry stated that India is looking into investment from Sri Lanka. He was referring to the range of $1 billion projects currently being discussed in Sri Lanka. This would aid in strengthening India’s presence here. They are willing to invest whatever it takes.”
Sabry stated that India is likely to be strategically interested in this…because they have security concerns.
Reuters asked India’s Foreign Ministry not to respond to our questions about its strategic aims and plans in Sri Lanka.
According to Reuters sources, New Delhi would continue to be concerned about regional security at a time when there is friction between China and India along the Himalayan frontier.
The source stated that security issues can be approached in two different ways. He asked not to be identified because the matter is so sensitive. It is investments that are being emphasized in terms of long-term engagement.
Officials said that Sri Lanka will seek Indian investment to establish renewable energy projects in the island’s north. They also want to collaborate with New Delhi to expand and develop the Trincomalee harbor in the northeast to become a major port.
These projects will take advantage of Sri Lanka’s close proximity to India and could assist New Delhi in balancing China’s large infrastructure projects that were built over the past 15 years.
Sri Lanka’s Tamil-dominated North also has ethnic connections with Tamil Nadu in southern India.
These talks and India’s unprecedented aid to the country this year, far exceeding other donors, highlight New Delhi’s attempts to regain influence on the small island, which is just a short distance from its southern tip.
The incident occurred in late June. A fortnight earlier, thousands of Sri Lankans protested and forced President Gotabaya Rajapaksa from power. India’s highest diplomat flew to Colombo to meet with him.
Vinay Kwatra (Foreign Secretary) met Rajapaksa, Prime Minister Ranil Wickremesinghe, and other officials of India’s Finance Ministry.
According to an official source in Sri Lanka, Kwatra and others raised China’s status as a major geopolitical issue during their discussions with Sri Lankan officials.
According to the source who did not wish to identify himself because he wasn’t authorized to talk to the media, China’s large role in the economy of the island was more troubling than any other. It had grown under the Rajapaksa administration.
The June meeting details have never been published.
Reuters asked Kwatra and Sri Lanka’s foreign ministers not to respond to questions about the June meeting.
The Indian foreign ministry released a statement shortly after Kwatra visited India, stating that discussions had been mainly about economic issues and deepening investment. The statement did not mention China.
New Delhi is concerned by China’s influence in the region, which includes Sri Lanka, Bangladesh, Nepal and Bangladesh. Since the clash between Indian and Chinese soldiers at a Himalayan border, in 2020, dozens of soldiers were killed, and diplomatic relations have become strained.
Sabry stated that India is sovereign and should take care of their security. We don’t wish to encourage tensions between countries, especially Sri Lanka.
China has been in dialogue with Sri Lankan officials on restructuring its debt. This is necessary for IMF to approve the deal. China also sent shipments of fuel, medicine, and rice.
According to the World Bank, Beijing’s borrowing is estimated at $7 billion or about 12% of Sri Lanka’s $63 billion in external debt.
China’s foreign minister said that they were willing to cooperate with the relevant countries and financial institutions in order to help Sri Lanka. This was in response to Reuters written questions.
According to the ministry, it does not know details about India’s investment and assistance in Sri Lanka. It also stated that Sri Lankan support was not targeted at any third party.
After the COVID-19 epidemic decimated tourism, Sri Lanka fell into financial distress and foreign remittances dropped. Prices for fuel and imports from Ukraine were pushed up by the war.
Rajapaksa’s government also refused to accept help from IMF. This led to a decline in foreign currency reserves, which worsened fuel and medicine shortages.
Tens of thousands took to the streets, storming government buildings and launching violent protests.
In July, the president fled Sri Lanka and then resigned. Sri Lanka had already reached an agreement with IMF to lend $2.9 billion.
It was Indian aid that allowed Sri Lanka to buy its time.
Uditha Devipriya, the chief international relations analyst of Factum (a Colombo-based think-tank on foreign policy), stated that Sri Lanka without India would have collapsed as Lebanon did.
Sri Lanka clearly has benefited from its proximity to the largest country in the region. India is interested in ensuring stability within its own backyard.
According to his office, Wickremesinghe, who was elected president after Rajapaksa resigned in July, unveiled the blueprint for Trincomalee. It has a deep-water harbor and a plan to collaborate with India to build a strategic port. He also proposed to establish an industrial zone, as well as a hub of energy.
Officials from both sides have indicated that they are in the preliminary stages of discussions about an undersea cable connecting India and Sri Lanka’s power grids, as well as a fuel pipe running southwards to Sri Lanka. These projects could total at least $ 4 billion.
After the signing of an agreement between India and China in March, the state-run NTPC in the energy sector is currently working to build a 100-megawatt solar power station in the Sampur district in Trincomalee.
India’s Adani Group, located in the northeast of Sri Lanka is currently awaiting approval for two wind energy projects in Mannar, estimated at $500m, according to Kanchana Wijesekera, Sri Lankan Power Minister.
ONGC Videsh Limited, the offshore arm of Delhi’s Oil and Natural Gas Corporation (OVL), is off the coast of the northwest. Two officials from Sri Lanka’s energy ministry said that they have had numerous discussions with Sri Lankan authorities and are currently finalizing regulations in preparation for inviting bids by global companies.
They both asked to remain anonymous as discussions are ongoing.
Reuters asked Adani, NTPC, and OVL not to answer questions about their projects in Sri Lanka.
According to a source familiar with the talks, oil and gas exploration was discussed in June.
Foreign Minister Sabry stated that the Sri Lankan government is keen to capitalize on India’s economic power, especially through infrastructure and renewable energy projects. While maintaining important relationships with key allies like China and Japan,
New Delhi is wary of China’s presence despite India’s goodwill showing in Sri Lanka.
The regional rivals were embroiled in a diplomatic dispute over Yuan Wang 5, a Chinese military survey vessel, that arrived at the Hambantota port of southern Sri Lanka.
Arindam Bagchi, the spokesperson for the Indian Foreign Ministry, stated that while India provided “unprecedented support” to Sri Lanka in times of economic crisis, New Delhi wouldn’t renege on its security requirements.
Officials from Sri Lanka said that despite India’s vital assistance during this financial crisis, Sri Lanka needs China, one of its largest creditors, to agree to a restructuring plan. This will allow Sri Lanka to secure the IMF loan agreement.
Sabry stated that Chinese investment was very important and Chinese relations are very important.
So I think that neither India nor anybody else expects Sri Lanka to not work with China. We have not been asked by any of them to be fair.”