Taming the Chinese dragon, Indian tiger and TUs

By Paneetha Ameresekere

Three things came out of Premier Ranil Wickremesinghe’s visit to India last week.

Those were India’s concerns over the leasing out of the Hambantota Port to the Chinese in a debt swap, India’s interest in the Trincomalee oil tank farm to counter the Chinese threat and Wickremesinghe’s keenness in getting Indian aid to develop certain northern roads linking up with the East and the’South’ of the country in a tourism promotional ‘putsch’.

Nonetheless, what figured, vis-à-vis the outcome of these New Delhi talks which Wickremesinghe had with the Indian hierarchy headed by Premier Narendra Modi was that the last thing that India would want, already surrounded by hostile neigbours, such as Pakistan to the North-West, China to the North-East , an uneasy relationship with Bangladesh to the East, to also have their southern flank comprising Sri Lanka, to be a launching pad for Chinese influence, thereby completing the encirclement of India. To India’s west and to a greater part of its eastern flank is the Indian Ocean.

India fought a border war with China in 1962 and lost thousands of square miles of territory to the latter. Meanwhile, since independence in 1947, India has also fought four wars with Pakistan, i.e. in 1947, 1965, 1971 and 1999. All three warring neighbours, India, Pakistan and China, are also nuclear armed.

However, Wickremesinghe, in his talks with the Indians, beginning with Premier Narendra Modi, National Security Adviser Ajit Doval, Dr. S. Jaishankar, High Commissioner to Sri Lanka Taranjit Singh Sandhu and also in separate talks with Congress leader Sonia Gandhi and former Premier Dr. Manmohan Singh, emphasized that China’s interests in Sri Lanka would remain only commercial. That, Hambantota, as a military facility, could only be used by the Sri Lankan Navy.

However, it’s unclear as to whether Wickremesinghe has been able to get a written assurance from the Chinese that Hambantota will not be used for military purposes.

Debt burden

The chief problem that the Sri Lankan Premier is facing is Sri Lanka’s multi-billion US dollar debt burden. A sizeable chunk of this debt is owed to the Chinese. These were accumulated during the previous Mahinda Rajapaksa regime. They came in the form of building unviable projects, funded by commercial loans from China such as the Hambantota Sea-Port, the Mattala Airport and a cricket ground and stadium at Sooriyawewa. All these three localities are in the Hambantota District, which is the Rajapaksa stronghold. Rajapaksa has now jettisoned Hambantota in favour of his son Namal, an MP of this district since 2010. Mahinda, after losing the 2015 presidential election has moved over to Kurunegala from where he was elected to Parliament in the 2016 parliamentary election, re-enacting a drama that last took place 12 years ago in 2004, when he was elected to Parliament from his family seat Hambantota, before giving it up the following year to his cousin Nirupama to contest the presidential election, which he did so successfully.

Nonetheless, it’s in lieu of repaying this Chinese debt that Wickremesinghe is pursuing this policy of seeking to lease out this southern port to the Chinese as a swap, as the Treasury coffers have all but run dry.

In another move, of a different sort, i.e. to get out of the current rupee illiquidity and high interest rate trap, Wickremesinghe is also pursuing a policy of going for a US$ 1.5 billion sovereign bond issue and a $ 1 billion syndicated loan, expected to be finalized within the next few weeks, while also uplifting the annual Sri Lanka Development Bond (SLDB) issues from $1.5 billion to $ 3 billion, for which Cabinet approval was obtained last week.

Change of heart

Nonetheless, India, which previously was not keen in throwing money to Sri Lanka, now, however, has a change of heart because of the Chinese threat to its southern flank.

Nevertheless, the only large infrastructure project which the Indians have thus far invested in Sri Lanka is the $200 million rail road project, re-linking Anuradhapura with Jaffna, a project they funded, after Sri Lanka ended its 26-year-old northern terrorist war in May 2009.

In talks with Wickremesinghe, among those projects that India was keen to develop was the Trincomalee oil tank farm.

Currently, 14 of the 99 tanks have been leased out to the Lanka Indian Oil Company (LIOC), a Government of India enterprise.

The new proposal is that another 75 to be developed as a joint venture between LIOC and the Ceylon Petroleum Corporation (CPC) and the balance 10, by the CPC alone.

Further, the other ventures that India is interested in is building a 500 mega watt LNG plant at Sampur, coupled with constructing a petroleum refinery also at Trincomalee.

The Indians were keen to get going on these projects as quickly as possible to counter the Chinese threat, official sources told this reporter. However, their complaint was that the Sri Lanka side was slow in granting approval to such projects.

With CPC trade unions (TUs) already having had struck work once, in protest over the government’s plan to give out these tanks to LIOC, the Premier may have his hands full in trying to convince the TUs to agree to the Indian request.

Tomorrow is May Day. It’s interesting to see whether Rajapaksa who’s the de facto head of the SLFP/UPFA breakaway faction, the Sri Lanka Podujana Peramuna (SLPP), also known as the Joint Opposition (JO) in Parliament, will make capital of these Indian requests at their May Day rally in Galle Face.

Cooperation on economic projects

Meanwhile, at a meeting between Modi and Wickremesinghe at Hyderabad House New Delhi on Wednesday, a memorandum of understanding (MoU) was exchanged between Development Strategies and International Trade Minister Malik Samarawickrama and India’s External Affairs Minister Shushma Swaraj, where it was announced to the media, that the MoU covered ‘cooperation on economic projects.’

Subsequently a press release from Wickremesinghe’s office said that the MoU included the Trincomalee oil farm, the LNG project, whilst also adding that a number of other areas would be covered under this agreement.

Nevertheless, it’s the reaction of the TUs, probably politically engineered, that Wickremesinghe and his government may have to watchout, particularly in question of the 75 oil tanks in Terincomalee which India is interested in.

Wickremesinghe who kick started his Wednesday’s official meetings with India’s Transport and Highways Minister Nitin Gadkari at the Hotel Taj Palace in New Delhi in the morning, before wrapping up his official engagements after meeting Modi that afternoon, wanted Gadkari to take-up the development of the Mannar-Jaffna and Trincomalee-Dambulla highways, whilst also building a new highway connecting Mannar with Trincomalee.

Wickremesinghe’s interest in these projects was tourism related, currently Sri Lanka’s 3rd largest foreign exchange earner.

Gadkari had agreed to send a delegation to conduct a feasibility study on these proposed road development projects suggested by Wickremesinghe.

Among the others whom Wickremesinghe met during this visit were former US President Barack Obama’s Assistant State Secretary for South Asia and currently a senior adviser for Albright Stonebridge Group’s South Asia, Ms. Nisha Biswal and BJP National General Secretary Ran Madhav.

A significant aspect of Wickremesinghe’s Delhi visit was that the China funded $1.4 billion Colombo Port City project, now renamed the Colombo International Financial City (CIFC), didn’t surface in these talks. It was Hambantota and the China question that was worrying Delhi and not ‘CIFC and Beijing’.

With Modi due in Sri Lanka next week for Vesak celebrations, followed by Wickremesinghe’s visit to Beijing soon after in furtherance of the latter’s ‘one belt-one road’ vision which may include Hambantota, the Sri Lankan Premier may have to perform an Indian rope trick, not only to satisfy Beijing and Delhi, but also local TUs as well in the political and economic chess game, with the country as the centre stage.

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