China salvage Sri Lanka, using twisty actions

New Delhi: Three current events post-Sri Lanka crisis should force India to rethink its ongoing strategy in the Island nation despite all of India’s support in an emergency and difficult times acceptance of India remains inadequate.

First, the Return of Sri Lanka’s President Gotabaya Rajapaksa, who escaped from Sri Lanka arrived home after seven weeks in exile without protests. The issue remains that there may be a change of guards in the Sri Lanka ministry and bureaucracy, but most of the ruling parliamentarians are part of an old coterie and continue to remain loyal to the Rajapakse family as new elections are yet to take place. How his return is going to reshape politics in Sri Lanka in the coming months more so how the present interim government is going to treat the former President, needs to be observed closely, as China would always like to have a pro-Rajapakse lobby ruling Sri Lanka.

The second Chinese tracking ship Yuan Wang 5 finally docked at Hambantota Port in Sri Lanka for replenishment after India and the United States tried and failed, to influence the local government to turn it away. Although the Chinese ship Yuan Wang 5 departed from Hambantota Port on August 22, it left an underline message for India, and other countries about China’s growing strength in the Indian Ocean. One needs to ponder that despite the extreme crisis in Sri Lanka, and with minimum support from China, Sri Lankan authorities could not push away Chinese pressure. The arrival of the PLA vessel might seem like a victory for Beijing in this strategically important island nation. The controversy over its docking continues to churn the Indian Ocean waters. Can India use this opportunity in its favour to showcase how China continues to militarize the Island and the Ocean when China needed to give a soft loan in the name of humanity to Sri Lanka?

Third, The International Monetary Fund agreed to provide Sri Lanka with $ 2.9 billion over four years. China, India and Japan are the creditors and guarantors, that debt sustainability will be restored. The first instalment is already on its way to Sri Lanka. Beijing has hinted at extending new loans than writing off old ones. Beijing wants to act as an Asian/African International Monetary Fund organisation, providing emergency funding/loans to cash-strapped countries. Beijing presently provided $74 million as assistance to Sri Lanka and promised to further support. Sri Lanka's debt from China is the US $6.8 billion. The foreign currency shortage has led the country to default on its foreign loans. Sri Lanka’s total foreign debt exceeds $ 51 billion of which $ 28 billion must be repaid by 2027. Political observers say that if China was so worried about Sri Lanka, it should have partially written off its Sri Lankan loans or extended years of repaying the loan.

These three major developments, post-political and economic crisis in Sri Lanka reinforce the limping foothold of China back in Sri Lanka that gives assurance that the present dispensation of Sri Lanka may not have to be completely dependent on India, Japan or even QUAD as long as China stands with them.

India needs to read the writing on the wall. For India and the rest of the world, China is again trying to exploit Sri Lanka for its purposes. India and many other countries believe that China engages in “debt trap diplomacy”, inundating poor countries with so much debt that they cannot pay back their loans and must surrender control of invested assets, allowing China to further strengthen its political influence.

The case study of Sri Lanka Hambantota port should not only open the closed mind and eyes of Sri Lanka, but it is also a warning to 97 other countries who have taken loans from China in the name of infrastructure building under the One Belt and Road programme.

The Hambantota project was financed by Chinese loans, but in 2017, Beijing allegedly seized the port when Sri Lanka could not return its debt. Ever since the example of Hambantota has been cited by many developed and developing countries seeking to warn of the dangers of Chinese lending. China says that they have not seized the port, but leased it for 99 years.

India China's war of words on Sri Lanka

In the recent crisis in Sri Lanka, China and India have been engaged in a tug of war for increasing influence in Sri Lanka. There have been several direct and indirect messages exchanged by foreign offices, and diplomats of India and China. Last week, Chinese and Indian diplomats in Colombo engaged in a war of words over the vessel’s controversial visit to Sri Lanka.

An article by the Chinese Ambassador to Sri Lanka Qi Zhenhong published in the Sri Lanka Guardian newspaper on August 26 created a furore.  Qi claimed that China and Sri Lanka had together “resisted the rude and unreasonable interference from third parties” to block the docking of Yuan Wang 5 at the island. The Sri Lankan government had permitted it initially but then asked the Chinese ship to defer. However, after pressure from the Chinese, Sri Lankans allowed them to dock the ship a week later. India raised concerns that the satellite ship’s possible use by the Chinese for surveillance of defence installations in southern India is not ruled out.

In his article, Qi criticized India for pressuring Sri Lanka to call off the Chinese ship visit. It is “always” making “various groundless excuses to bully Sri Lanka and trample on Sri Lanka’s sovereignty and independence repeatedly,” he said. He also pointed to a history of aggression from the island’s “northern neighbour.”

The Indian High Commission in Colombo responded immediately. In a series of tweets, it criticized Qi for a “violation of basic diplomatic etiquette.” India blamed China’s “opaqueness and debt-driven agendas” for Sri Lanka’s current economic crisis and went on to point out that Sri Lanka needs support, not unwanted pressure or unnecessary controversies to serve another country’s agenda.” India also was very clear in saying that in the early days of the humanitarian and economic crisis, China was reluctant to help Sri Lanka.

China remained close to Mahinda Rajapaksa from 2005 to 2015 when he was the President of Sri Lanka; then it lost ground to Delhi under his successor; but regained influence when Mahinda’s brother, Gotabaya, took the helm in 2019.

India in the present crisis like a responsible neighbour supplied Sri Lanka with food and fuel after the complete chaos and collapse of the economy of Sri Lanka. India gave support of around US$3.8 billion of assistance. India also took a risk in supporting a currency swap arrangement with Sri Lanka in April 2022 despite Sri Lanka having no foreign currency reserves. India received thousands of Sri Lankan refugees and encouraged the Indian private sector to increase humanitarian support to the country.

India's support and soft loans to the tune of $3 billion to Sri Lanka without any conditions are simply to soften the country's situation. This has made Sri Lanka meet some of the IMF's conditionalities regarding the restructuring of debt. India is presently working closely with US-Japan and Australia. These four countries work in close cooperation through the Quadrilateral Security Dialogue.

Way Forward

Two months ago, Sri Lanka has seen one of its worst years-the government decided to default on its external debt, widespread shortages of essential items, massive inflation, mass protests and uprisings against the powerful Rajapaksa family.

The country's debt led to a major humanitarian crisis for the local population. India stepped up aid with lines of credit (LoC) and regular shipping of food and fuel. With close ally China slipping out of sight during its worst crisis, New Delhi ensured that Sri Lanka did not go down completely.

What is now important is a follow-up that India needs to consider Sri Lanka as an equal partner despite the ongoing crisis in Sri Lanka. Sri Lanka needs to feel important and not like a second-class country. Our ethos and religions have taught us that be with those who need us in times of difficulty and don’t pretend as if we are doing charity for them.

India needs to explain to the people of Sri Lanka (not present political leadership) how China is playing hardball against Sri Lanka when they need to write off the loans and step-up humanitarian aid to the country.

India along with Japan also needs to convince Sri Lanka to support the multilateral Indo-Pacific policy as they live in the Indian Ocean to rebalance economically and politically. QUAD with India as the lead can work with Sri Lanka to bring economic stability to the country. For this India needs to build trust.

India initiated some important and timely support by sending official teams to revive and train their finance ministry, which will lead to their country’s stability. These baby steps in a way are strengthening India's First Neighbourhood Policy.

In conclusion, India should consider the fallen as equal and important and believe in a long-term relationship so that both can trust and be dependent on each other. There are several ways of building mutual interest, businesses to extend long-term relationships which include religious travel, medical tourism, climate change, solar energy projects, strengthening joint security in the Indian Ocean etc.