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Instigated by China, Sri Lanka could end port deal with India?

Sri Lanka recently announced that Colombo will review the port agreement signed between India and Sri Lanka at an estimated cost of $700 million.

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Amid India’s growing tensions with China, Pakistan and Nepal, there are signs that ties with Sri Lanka could also turn sour as Beijing could instigate the island country to terminate a port deal with New Delhi. 

Sri Lankan President Gotabaya Rajapaksa recently announced that Colombo will review the port agreement signed between India and Sri Lanka at an estimated cost between $500 to $700 million.

Experts see this move as an effort to distance itself with ‘QUAD’ nations, especially India, which is trying to counter China’s growing geopolitical influence. The “QUAD” nations include the U.S., India, Japan and Australia who currently have turbulent ties with China.

“We heard that there is a lot of pressure from India over this project. But we are not a province of India, we are a sovereign nation and we do not need to dance to their tunes,” said Shyamal Sumanarathna, secretary of the Ports, Commerce Industries and Progressive Workers Union. “Following our strike, the prime minister assured [us] that he will sort this issue out,” he added.

The previous government of Sri Lanka signed a Memorandum of Understanding (MoU) with India and Japan to develop the new East Container Terminal (ECT). According to the terms, Sri Lanka holds 51% stake while India and Japan share the remaining stake.

However, the Trade Unions fear that it will cede the ownership of the ECT to India. They are demanding a guarantee that the project will be fully owned by the Sri Lanka Ports Authority, a government entity. Prime Minister Mahinda Rajapaksa has assured them that there is “no final agreement” yet.

“About two-thirds of Sri Lanka’s international cargo traffic is with India. There are opportunities for win-win cooperation among India, Sri Lanka and Japan in developing the ECT to promote prosperity in our maritime region,” stated a representative of the Indian High Commission in Colombo.

Rajapaksa has formed a five-member committee to review and report on the concerns over the project in 45 days and also to recommend steps ensuring the terminal delivers the maximum benefit for Sri Lanka.

However, it is important to note that Sri Lanka has turned to China several times for bailouts when the country went down on lockdown for two months amid the Covid-19 pandemic.

As reported earlier by EurAsian Times, Sri Lanka had relied heavily on China to construct $1.5 billion port in Hambantota in the country’s south. After the port was operating at a loss and couldn’t generate enough revenue to repay the loan to Beijing, the port was leased to China for 99 years in return for $1.1 billion which eased its position.

Beijing further granted $500 million to Colombo to fight the pandemic to help the looming financial crisis.

Sri Lanka has also requested various foreign governments including India for a postponement of repayment of the debt as the island nation is reeling under major economic crisis. “The matter has progressed and technical level discussions are presently underway,” Spokesperson in the Ministry of External Affairs Anurag Srivastava said.

Rohan Masakorala, a maritime shipping expert and CEO of the Shippers Academy Colombo disputed the trade union’s claim calling them “nationalistic” and politically motivated with views, not in line with the global business strategies.

“South Asia Gateway Terminal has been running for over 20 years with a number of international partners, and similarly the Colombo International Container Terminal has been operating for seven years with a Chinese company,” he said.

Sri Lanka’s government has also recently halted the Japan-funded Colombo Light Railway project and a $480 million Millennium Challenge Corporation grant from the U.S. Harin Fernando, a Member of the Parliament of Sri Lanka, accused the current administration of turning Sri Lanka into a “banana republic” under Chinese rule.

“In 2014, before we toppled the government, this is what we highlighted. But now we see [the Chinese] doing this much more strategically,” he said. He is also of the view that China now has a complete monopoly on Sri Lanka’s development projects and that Sri Lanka is “under debt” of China.

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