Home » Sri Lanka navigates geopolitical dynamics with deft diplomacy

Sri Lanka navigates geopolitical dynamics with deft diplomacy

by Gayan Abeykoon
May 15, 2024 1:24 am 0 comment
Iranian President Ebrahim Raisi at the inauguration of the Uma Oya Project.

In the last week’s column here, the importance of strategic positioning of Sri Lanka was highlighted with specific reference   to Japan.   Japan is keen to make sure that Sri Lanka, as a country straddling the vital sea-lanes, remains safe and stable so that transnational trading across the region progresses unhindered.    Japan has taken an active role in restructuring bilateral debts of Sri Lanka as the chair of the Official Creditor Committee.  It has offered to donate a vessel equipped with sonar technology to detect undersea moments of vessels.


It is the story with Japan.  Still, no matter what anyone might say, the government, under President Ranil Wickremesinghe, is wonderfully managing relations with the world powers with competing      interests albeit some occasional setbacks leading to antagonism.

In the restructuring of bilateral debts, China is having a different approach. In fact, China is calling it debt treatment, not debt restructuring.  While   debt restructuring with other bilateral creditors progresses smoothly with the MoU about to be signed now, China has also come on board. Chinese President Xi Jinping assured Prime Minister Dinesh Gunawardena that his country would not stand in the way of Sri Lanka. It is a major achievement.  In case, China stood its ground with a different approach, debt restructuring with other creditors seeking an even handed approach would not have been possible.

It is a tightrope walk for Sri Lanka requiring deft diplomacy. Sri Lanka is doing it successfully, and there is ample proof for it.

United States’ Assistant Secretary Bureau of South and Central Asian Affairs, Donald Lu discussing with President Ranil Wickremesinghe..

United States’ Assistant Secretary Bureau of South and Central Asian Affairs, Donald Lu discussing with President Ranil Wickremesinghe..

On the one hand, Sri Lanka   approved a proposal by China’s Sinopec   to build a $4.5 billion refinery, making it the largest single investment in the island nation in the wake of the economic crisis.

The Cabinet approval cleared the state-owned refiner to finalise project details and sign an agreement with the government before it starts building the export-oriented refinery at Hambantota. On the other hand, the government   secured an investment from India’s Adani Green Energy to develop wind power stations in Mannar and Poonerin in Sri Lanka.   The renewable energy company got the approval in February 2023 to invest US $442 million towards the development of the 484 megawatts wind power plants in the two areas located in Northern Sri Lanka. A power purchase agreement for 20 years has also been signed between the two parties.   These are just two examples to show how Sri Lanka, as a country, has secured investments from two powers with competing interests. Sri Lankans sometimes jokingly say the south is for China and the north for India.  In the development of further energy linkage, Sri Lanka and India are planning to develop a multipurpose two-way pipeline.

More importantly, the United States is also coming in a big way now to invest in Sri Lanka. In its attempts to counter China’s Belt and Road Initiative (BRI) which funds infrastructure investments in the developing world, the United States established the U.S. International Development Finance Corporation (IFC) financed over US $ 500 million as a project loan in the execution of the West Container Terminal of the Colombo Port.

It is further keen to extend financial assistance to Sri Lanka triggering hopes for Sri Lanka to secure much needed foreign exchange to tide over the current economic crisis.

In November, 2023 the US announced US$ 19 million in additional funds for the development of Sri Lanka. The Food and Agriculture Organisation of the United Nations (FAO) and the United States Agency for International Development (USAID) are partnering with the Sri Lanka Ministry of Agriculture in a US$ 9.2 million project to revitalise agriculture in Sri Lanka.  The United States considers Sri Lanka a vital partner in the Indo-Pacific strategy.    It will not compromise its relations with Sri Lanka no matter what.  Sri Lanka is thus well positioned to benefit from it

China, the greatest geopolitical rival of the United States, has invested heavily in Sri Lanka. It has already invested US $ 1.5 billion in the Colombo Port city. Likewise, China Merchants Group    is successfully doing operations in the country including the operation of the Hambantota Port.  Its total investment in Sri Lanka now amounts to US $ 2 billion.

In another example of managing foreign relations successfully, Sri Lanka currently supports a two-state solution to the ongoing Israeli–Palestinian conflict, and recognises both the State of Palestine and Israel. In the meantime,    Sri Lanka sent over 4000 people to employment in Israel while establishing a fund for the benefit of children affected in Gaza due to the Israeli strikes. Children of Gaza’ Fund has already received assistance from many donors.

Iranian President Ebrahim Raisi visited Sri Lanka symbolising Sri Lanka’s neutral policy and skillful maintenance of it.  He came for the inauguration of the Uma Oya project.

During his visit, the Iranian leader said his country has proven the West doesn’t have a monopoly on technology while inaugurating a hydropower and irrigation project in Sri Lanka on Wednesday.

Raisi is the first Iranian leader to visit Sri Lanka since former President Mahmoud Ahmedinejad visited the country in 2008.

“The Western countries tried to convince all others that knowledge and technology is exclusive to those countries,” Raisi said, addressing Sri Lanka’s President Ranil Wickremesinghe and other top officials. He added the idea was rooted in “colonialism and arrogance” and that Iran was now able to share its knowledge with others, including projects in 20 countries.

The Uma Oya project, in the central Badulla district, was constructed with Iranian technical assistance. Valued at $514 million, it was started in 2010 by Iran’s FARAB engineering group and Iran initially provided $50 million. But in 2013, funding could not be continued because of international sanctions against Iran. The Sri Lankan government then decided to complete the project with its own funds using the same Iranian contractor.

Sri Lanka is now reviving its ties with Iran and the other West Asian countries while maintaining ties with the western world. Sri Lanka’s strategic poisoning has helped it in this endeavor.

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