Is Sri Lanka falling to Chinese debt trap?

Is Sri Lanka falling to Chinese debt trap?

21 February 2021 06:31 pm

Sri Lanka has decided to re-acquire 99 oil tanks, which were leased out to Indian Oil for 30 years in 2003. The Indian High Commission in Sri Lanka says the reports are incorrect but there's a pattern.

Recently, Sri Lanka halted a port project involving India and Japan. US withdrew its aid offer because Colombo wasn't using the funds. While Chinese investments are being steadily approved.  

Reports say India was supposed to upgrade and commission the world war era tanks. But talks remained stalled for more than a decade. Then in 2015, discussions revived when Prime Minister Modi visited Sri Lanka. By 2017, the two sides had a roadmap but the project never really took off.

The Indian High Commission issued a statement on Thursday, claiming that there is no truth in these reports. Indian diplomats say both sides will explore ways to jointly develop and operate the facility.

Last month, Colombo had scrapped a trilateral agreement with India and Japan. This was for the development of the eastern container terminal at the Colombo Port.

Apparently, the project had received strong opposition from trade unions across Sri Lanka. This is despite the fact that Colombo was supposed to hold the majority stake.

It's not just Indian projects that Sri Lanka is scrapping. Even the United States suffered a setback this year. It withdrew $480 million in infrastructure aid to Colombo because Sri Lanka said it wasn't keen on using it.   

The only country that seems to be getting a red-carpet welcome in Colombo is China. Within weeks of rejecting US aid, the Sri Lankan cabinet cleared a Chinese energy project. It is quite close to Indian borders.

A Chinese company has won the contract to set up hybrid wind and solar energy projects off the northern Jaffna peninsula on three islands, which are barely 50 kilometers away from the Tamil Nadu coast.

Reports say India had lodged a strong protest with Sri Lanka. It happened days before the Colombo Port deal was cancelled.

The Chinese seems to be deepening their influence in Sri Lanka under the Rajapaksa Government.

Before the energy deal, they secured several major projects. It includes a $13 billion city on Sri Lanka's sea front, a new Chinese factory in Hambantota, a $300 million tire plan for the Shandong Haohua tire, a $one billion road from Colombo to Kandy and $300 million coal-based power plant in Norochcholai. Colombo has given green-light to all these projects and pushed itself further under Chinese debt.   

India hasn't given up though. Reports say India has offered a grant of $12 million to displace the Chinese company for the energy project off the Jaffna peninsula. A group of Tamil parties have also voiced their opposition to Chinese involvement.