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Home > India > News > Columnists > B Raman

Is China doing a Mayanmar in Sri Lanka?

June 27, 2008

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Is China doing a Myanmar in Sri Lanka [Images] by capitalising on the policy of President Mahinda Rajapakse of diversifying Sri Lanka's geo-political options even while professing close friendship with India?

That seems to have been one of India's concerns, which prompted a two-day visit to Sri Lanka by a team of senior advisers of Prime Minister Dr Manmohan Singh [Images] consisting of National Security Adviser M.K.Narayanan, Foreign Secretary Shiv Shankar Menon and Defence Secretary Vijay Singh [Images] on June 20 for talks with Rajapakse and senior Sri Lankan officials and important Tamil leaders.

Officially, the visit was projected as a return visit to reciprocate a similar high-level visit to New Delhi in September last by a  Sri Lankan delegation headed by Defence Secretary Gothbaya Rajapakse and as a preparatory visit before the forthcoming 15th summit of the  South Asian Association for Regional Co-operation in Colombo from July 27 to August 3.

Originally, the summit was to have been held at Kandy where the security-related problems would have been less than in Colombo. In March last year, the Sri Lankan government decided to have it in Colombo since, in its view, the infrastructure at Kandy would have been inadequate to host the summit. The shifting of the venue to Colombo has enhanced India's security concerns.

Sri Lanka had successfully hosted the 6th SAARC summit at Colombo in 1991 and the 10th in 1998 and had provided effective security to the leaders of the participating countries. The 15th summit will be held at a time when a large number of the Sri Lankan security forces are engaged in an operation to re-capture the control of the Northern Province from the LTTE. Facing increasing pressure from the security forces, the LTTE has stepped up attacks with explosives on soft targets in areas in and around Colombo. Moreover, its bringing into action its planes for air strikes since March last year and the inability of the Sri Lankan security forces to identify where these planes are kept and from where the air attacks are being launched made the pre-summit security scenario in Colombo worrisome.

While the LTTE is unlikely to target the summit or its participants, the summit could provide it with an opportunity to create drama in order to prove its prowess and disprove the claims of the government that the LTTE has been weakened beyond recovery. Will the Sri Lankan security forces be in a position to provide effective security to all the participants in general and to the Indian prime minister in particular? One of the purposes of the visit of the Indian team seems to have been to make that assessment.

Another purpose seems to have been to assess the implications to India of Rajapakse's policy of bringing in other external state actors into Sri Lanka in order to give itself more geo-political wriggle room. In the past, India had to worry only about China, Pakistan and the US. Now, Rajapakse has started courting Iran, Saudi Arabia and Malaysia. Iran has started playing an important role in the oil refining sector and it is only a question of time before it starts demanding a role in the retail sale of oil, a sector in which the Indian Oil Corporation [Get Quote] presently has a pre-eminent role.

To counter the fears of the US and the Sunni Arab states over his flirting with Iran, he has also been trying to bring in Saudi Arabia in the oil sector. Malaysia emerged last year as the largest foreign investor in Sri Lanka. As a result of his moves, India is likely to find its political and economic influence in Sri Lanka gradually shrinking.

In view of India's  improving relations with the US, it is not concerned as it would have been in the past over the increasing US activities in Sri Lanka and the increasing interest of the US Pacific Command in Sri Lanka. The US Navy is eyeing Colombo as a fall-back option in case the continuing use of the Karachi port for logistics and other purposes becomes difficult in view of the anti-US feelings in Pakistan. Presently, India is not highly concerned with the growing economic ties between Sri Lanka and Malaysia either. It can live with it.

What India is concerned is over the increasing activities of China and Pakistan, the entry of Iran and the expected entry of Saudi Arabia into Sri Lanka. While Pakistan's relations with Sri Lanka are largely focussed on military supplies and training, China's relations have greater strategic implications for India -- covering military supplies and training, the construction of a modern port at Hambantota in the south and oil exploration in the Mannar area. The expected semi-permanent stationing of an increasing number of Chinese experts in these areas for carrying out these projects will add to the concerns of the Indian security bureaucracy.

Mayanmar's action in allowing the Chinese to have a semi-permanent presence in the Coco Islands brought the Chinese within monitoring distance of India's space establishments on the eastern coast. The semi-permanent presence, which the Chinese  are now getting in Sri Lanka, will bring them within monitoring distance of India's fast-breeder reactor complex at Kalpakam near Chennai, the Russian-aided Koodankulam nuclear power reactor complex in southern Tamil Nadu and India's space establishments in Kerala [Images].

Reporting on the visit of the senior Indian officials to Colombo, the Times of India on June 23 quoted an unnamed senior Indian official in New Delhi as stating as follows: "The story of Myanmar is being repeated in Sri Lanka. China is already all over the island nation, with a flurry of arms deals, oil exploration and construction projects like the Hambantota port."

The paper also reported: "Colombo has signed a $37.6 million deal with the Beijing-based Poly Technologies for a wide variety of arms, ammunition, mortars and bombs. Sri Lanka is also getting some Chinese Jian-7 fighters, JY 11-3D air surveillance radars, armoured personnel carriers, T-56 assault rifles (a copy of the AK-47), machine guns and anti-aircraft guns, rocket-propelled grenade launchers and missiles."

The work on the Hambantota port is progressing fast with typical Chinese efficiency. Sri Lankan sources assert that it will be only a commercial port and not a potential naval base. One has to wait and see.

The Hambantota port construction is estimated to cost $1 billion to be lent by the Exim Bank of China. The entire project is expected to be completed in 15 years in four phases. The first phase of construction, which was started in October 2007, is estimated to cost $450 million. The entire project, inter alia, provides for the construction of a gas-fired power plant project, a ship repair unit, a container repair unit, an oil refinery and a bunkering terminal. The bunkering terminal, which is expected to be completed in 39 months, provides for the terminal to handle up to 500,000 metric tonnes of oil products a year.

The Daily News of Sri Lanka reported on June 19: "A project proposal sent by the China Huanqiu Contracting and Engineering Corporation for building the bunkering facility and tank farm at the Hambantota harbour has been approved by the project committee and the cabinet-appointed negotiations committee. The total value of the project would be $76.5 million and it would be completed by 2010. A set of fuel tanks, bunkering facilities, aviation fuel storage facilities and liquefied petroleum gas storage facilities will be built under the project at Hambantota, about 230 km south of Colombo." The media has also reported that although the Hambantota port was initially planned as a service and industrial port, it is expected to be developed as a trans-shipment port at a later stage to handle 20 million containers per year.

Neither India nor China has so far started oil/gas exploration work in the one block each in the Mannar area awarded to them by the Rajapakse government without bidding as a gesture of goodwill. The Oil and Natural Gas Corporation, which was offered the block allotted to India without bidding, said in September last that it was not interested in the assigned block, due to low prospects and the fact that Sri Lanka was asking for a big bonus in return for this gesture. The Sri Lankan government said it would negotiate with the ONGC [Get Quote] for a new oil block with greater prospects. It is not known whether the Chinese are satisfied with the block offered to them without bidding and, if so, when they would start the exploration.

Foreign oil companies have not so far been enthusiastic over the prospects of finding oil/gas in exploitable quantities in the Mannar area. Earlier this year, the Sri Lankan government invited bids for three blocks. Of these, block No 1, which extends over an area of 3,338.10 square kilometers and is nearest to India, received bids from ONGC Videsh, Cairn India [Get Quote], and Niko Resources of Cyprus. Cairn India, is 69 per cent owned by  Cairn Energy of London [Images], which has been active in India, Nepal and Bangladesh. Canada [Images]-based Niko Resources is active in Canada, India and Bangladesh. Block No. 2 received  bids from both Cairn India and Niko Resources while Block 3, the largest being 4,126.51 sq km, received a bid only from Niko. None of these blocks received any bid from China. The Sri Lankan government announced on June 6, that after evaluation it has decided to accept the bid of Cairn India for block No 1 and invited it to send its representatives to Colombo for negotiations. Fresh bids are to be invited for the other two blocks. The rules stipulate that for each block there should be a minimum of three bids before evaluation.

In response to an invitation by Rajapakse during his visit to Teheran in November last year, President Mahmud Ahmadinejad of Iran paid a two-day official visit to Sri Lanka on April 28. Since last year, Sri Lanka has been facing economic difficulties due to the drying-up of economic assistance from countries of the European Union such as Germany [Images] because of what they perceive as the indifferent attitude of the Rajapakse government to complaints of human rights violations of the Tamils and its refusal to seek a political solution to the problem.

Instead of succumbing to the EU pressure on the subject, the Rajapakse government turned for increased assistance to other countries such as China and Iran, which did not raise human rights issues as a condition.

Assistance from Iran was of crucial importance to Sri Lanka because of the government's inability to pay for its increasingly costly oil imports. The Ahmadinejad government readily agreed to provide oil at concessional rates to Sri Lanka and to train a small team of officers of the Sri Lankan Army and intelligence in Iran.

It also agreed to provide a low-interest loan to Sri Lanka to enable it to purchase defence-related equipment from China and Pakistan. In addition, it agreed to invest $1.5 billion in energy-related projects in Sri Lanka. One of these projects is for the production of hydel power and the other to double the capacity of an existing oil refinery in Sri Lanka. Work on the construction of the hydel project started during Ahmadinejad's visit.

Iranian engineers have already been preparing the project report for doubling the capacity of the refinery and for modifying it to enable it to refine in future Iranian crude to be supplied at concessional rates. The existing capacity is 50,000 barrels a day.

Abdul Hameed Mohamed Fowzie, Sri Lanka's petroleum minister, visited Riyadh, Saudi Arabia towards the end of March. He announced there that Saudi Arabia had agreed to train Sri Lankans in the field of exploration and refining of oil in the island. He told the media: "We had fruitful discussions with my counterpart here and we are happy that the kingdom has agreed to cooperate with Sri Lanka in areas of mutual interests in the field of oil supply, exploration and investments. We have plans to improve our refining capacity from 50,000 to 100,000 barrels a day and getting Saudi expertise for the proposed expansion will facilitate the successful implementation of the project. Sri Lanka needs a cracker to convert crude into diesel and petrol which would cost the government some $400 million. I have requested my counterpart to recommend that the OPEC Fund assist us in the purchase of this plant."

Sri Lanka presently gets 70 per cent of its oil from Iran, 10 per cent from Saudi Arabia and 20 per cent from Malaysia and other countries.

B Raman