Dhairya Maheshwari |Sputnik International | June 20, 2022
Sri Lankan PM
Ranil Wickremesinghe said this month that Colombo will have to return to
Russian oil imports if it fails to procure oil from other sources. Colombo
reportedly bought a 90,000-metric ton shipment of Russian crude last month to
restart its only refinery, but has been wary of buying more, owing to its fear
of offending the West.
Western states,
including the US, are creating “impediments” for Sri Lanka as it tries to
source discounted Russian crude in order to ease its ongoing fuel crisis, a
former Indian Army colonel who has previously served as a military intelligence
(MI) specialist in Sri Lanka has told Sputnik.
“Sri Lanka would
not like to offend Western powers by opting for Russian trade as they are
capable of arm twisting international monetary bodies who can bail out Sri
Lanka from its economic logjam,” says Colonel R. Hariharan, an expert at the
Indian security think tank Chennai Centre for Chinese Studies (C3S). He was
also part of the Indian Peacekeeping Force (IPKF) to Sri Lanka in the 1980s.
The observations by Hariharan came as
Prime Minister Ranil Wickremesinghe began deliberations on a bailout package with
the International Monetary Fund (IMF) in Colombo on Monday.
The Sri Lankan government warned its
citizens last week that the ongoing fuel supplies would only last till 21 June.
Meanwhile, Colombo awaits, as of Monday evening, an official confirmation on
another credit line of $500 million from New Delhi meant to import fuel.
Sri Lanka is facing its worst
economic crisis since 1948, caused by depleting foreign exchange reserves. The
government has been unable to pay for its fuel, food and other essential
imports, triggering crippling shortages, runaway inflation and even violence
among riled-up citizens.
Hariharan further underlines
that anti-Russia sanctions in the wake of the special military operation in
Ukraine have further “complicated” matters for Sri Lanka.
“[The sanctions] on Russia has skewed
the global economy, which was taking baby steps to recover from Covid pandemic.
Prices of oil and commodities like rice, wheat, corn and edible oil prices have
skyrocketed,” the ex-Indian military officer notes.
With regards to importing Russian
crude, Hariharan feels that Sri Lanka “might change its mind” if and when New
Delhi introduces a “clear cut methodology” for trade with Moscow.
“In such a case, Sri Lanka would probably be able to use it to
improve its trade with Russia,” he says.
In spite of growing pressure from
Washington and the EU on New Delhi to tone down its strategic and business ties
with Moscow, the Indian government has doubled down on its decades-long
strategic partnership with Russia amid the Ukraine conflict.
As per media reports,
Moscow has overtaken Saudi Arabia to become New Delhi’s second-biggest oil
supplier in May, providing for about 16 percent of the overall imports. India
imported just around 1 percent of its overall crude from Russia in
January-March’22 quarter.
Hariharan believes
that a “robust” India-Russia ties in energy sector could be a precursor for Sri
Lanka to shed its inhibitions on ramping up ties with Moscow.
“Geography has
conferred a huge strategic advantage to India, as Sri Lanka is located within
40 km from India's southern tip,” says Hariharan, as he explains the close ties
between New Delhi and Colombo.
He notes that New
Delhi has emerged as one of the biggest donors to Sri Lanka since the eruption
of the economic crisis this year, having allotted around $3 billion in
bilateral assistance, aside from credit lines for meeting the fuel shortages
among others.
“Neighborhood First (New Delhi’s
preference for interests of the neighboring nations in its foreign dealings) is
an important component of Prime Minister Narendra Modi's foreign policy
strategy and Sri Lanka as a close friend and neighbor has always depended upon
India's help in times of distress,” recalls the Indian expert.
China’s Presence in Sri Lanka ‘Can’t be
Wished Away’
Hariharan reckons in spite of
misgivings in New Delhi and in some Western capitals about Beijing’s growing
influence in Colombo, China is “firmly established” there and its presence can’t
be “wished away”.
Besides being a large external creditor
of Sri Lanka, state-backed China
Merchant Port Holdings, a Hong Kong-headquartered company, was
awarded a 99-year lease in the Hambantota port in 2017. Beijing is also
developing several state-of-the-art infrastructure projects in Sri Lanka under
the One Belt One Road (OBOR) initiative.
While Hariharan notes that
Beijing has emerged as a “strategic rival” of New Delhi in south Asia in recent
years, Hariharan also believes that India and China could collaborate in Sri
Lanka to help it overcome the economic crisis.
“That would be in
line with the BRICS’ vision of creating an equitable world order,” he says,
referring to the five-nation grouping comprising Brazil, Russia, India, China
and South Africa.
“Geo-strategically,
Sri Lanka dominates the sea lanes of the Indian Ocean, making it a strategic
pivot of the region. China is aware of this,” the former Indian colonel says.
He further notes Beijing
became an “indispensable” military partner for Sri Lanka in the final stages of
the war against the Liberation Tigers of Tamil Eelam (LTTE), a more than
two-decade long insurgency which ended in 2009.
Hariharan says
that Beijing would eventually agree to restructure Sri Lanka's debt, in spite
of being non-committal to do so, so far.
“We can expect
China to relax the repayment terms in the coming days after dragging its feet
as a special favor to Sri Lanka. I think it has more to do with China's style
of economic diplomacy than IMF intervention in Sri Lanka,” he says.
One of the sticking
points between the IMF and the Sri Lankan government is the restructuring of
external debt that Colombo owes to Beijing.
The IMF has a
policy of not agreeing to a bailout package unless all the lenders write down
their loans.
Sri Lanka’s
central bank governor P. Nandalal Weerasinghe governor said last week that Chinese debt accounts for 15 percent
of Colombo’s overall foreign borrowings. Sri Lanka has asked China to
renegotiate the terms of the debt, in line with the IMF’s demand.
The views and opinions expressed in this
article are those of the author and do not necessarily reflect the position of
Sputnik.
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