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Sri Lanka builds bridges with the West in course correction

Reflects Growing Awareness Of The West’s Economic Importance And The Costs Of Depending Too Much On China

Kerawalapit Power Station.

Sri Lanka appears to be building bridges with the US and other Western nations, reflecting a growing awareness of two things: (a) the West’s economic importance to it (b) the long term political and economic cost of depending too much on China.

In the absence sufficient help from other countries, the Lankan government is heavily depending on Chinese vaccines to contain COVID-19. It has gratefully received Chinese largesse in other forms to tide over the on-going economic crisis.  But at the same time, it is aware that it is the butt of criticism abroad for depending heavily on China and is looked down upon for that in the West and suspected by India. 

Be that as it may, the Lankan course correction is expected to be major or radical but incremental and tentative. This is because a radical departure from the present policies would be politically untenable given Sri Lanka’s long- standing adversarial relationship with the “colonial” West. Therefore, a revival of the American proposal to sign the US$ 480 million Millennium Challenge Corporation (MCC) fund or signing the Status of Forces Agreement (SOFA) seem unlikely in the foreseeable future. In that context, joining Quad is out of the question.

But still a pro-Western tilt is evident. One of the manifestations of this is Energy Minister Udaya Gammanpila’s going to Dubai for meetings with officials of Exxon Mobil and two other international oil and gas firms for the exploitation of gas in the Mannar Basin in North West Sri Lanka. According to Sunday Times, the Minister claims this project will help Sri Lanka pay off billions of dollars in foreign debt. Gammanpila is  close to President Gotabaya Rajapaksa, and therefore, he might be negotiating with a green signal from the President himself. 

The ECONOMYNEXT website reported that the government has engaged UK-based BellGeospace to conduct aerial surveys of the Mannar Basin to collect geophysical data which will help investors choose oil and gas exploration blocks there. “This is done at no cost to the government. The data belongs to the government. BellGeospace will sell the data for prospectors and recover their investment. They will also split profits with the government,” Gammanpila is quoted as saying.

New Fortress Energy

Meanwhile, Finance Minister Basil Rajapaksa, who is known to be pro-US, has been pushing through an unsolicited proposal from the US-based company New Fortress Energy (NFE) to meet all of Sri Lanka’s Liquefied Natural Gas (LNG) needs. NFE will be expected to supply Sri Lanka’s entire LNG needs for the next ten years.

Acceptance of the unsolicited proposal from the US company has come in for flak from the unions of the State-owned Ceylon Electricity Board (CEB) who want an open tender. But Basil Rajapaksa, a brother of President Gotabaya Rajapaksa, is reportedly determined to pursue the deal with NFE

The deal also includes the purchase of 40% of shares of the Lankan company West Coast Power by NFE for a sum of US$ 250 million. The Lankan company is owned by Lanka Transformers Limited (LTL), a subsidiary of the state-owned Ceylon Electricity Board (CEB). It will be financially advantageous to the cash-strapped CEB and the country as a whole.

Diplomatic Campaign

While economic ties with the US and the West are being established, on the broader diplomatic plane, the Lankan government is stressing its “neutral” or “non-aligned” character to avoid being branded as pro-China. In a recent speech in Bologna in Italy, the Lankan Foreign Minister G.L.Peiris made it a point to extol “non-alignment” and argue that some of its principles are very relevant today.

In a zoom meeting with the Commonwealth Secretary-General Patricia Scotland in New York, Peiris reaffirmed Sri Lanka’s active commitment to dialogue and engagement with the British Commonwealth.

“As a founding member of the Commonwealth, Sri Lanka remains proactive and committed to the values, principles and objectives of the Organization. Sri Lanka looks forward to further collaboration with the Commonwealth in a number of areas including commerce, education, vocational training and climate change. The Commonwealth is a celebration of diversity with all of its Member States enjoying a common objective, making it unique and exhilarating,” Peiris said.

President Gotabaya has repeatedly said that Sri Lanka seeks goodwill and investments not only from China but from all countries. He had given concrete investment proposals to Mike Pompeo when he visited Sri Lanka as US Secretary of State. It is another matter that the US did not respond adequately till recently when the American Ambassador started pressing for a more open and modern regulatory system with a level playing field for all foreign investors.

To further smoothen relations with the US, the President has decided to appoint Mahinda Samarasinghe, a pleasant-mannered, tactful and seasoned negotiator with a fund of international experience both as a diplomat and as a cabinet Minister. Samarasinghe has represented Sri Lanka at the UN in Geneva, the ILO and WHO. As co-chair of the Permanent Standing Committee on Human Rights in Sri Lanka, he has worked in close cooperation with the United Nations Human Rights Council. (UNHRC).

Economic Compulsions

Economic compulsions are greatly responsible for bring about a spirit of accommodation vis-à-vis the US and the West.

The US is Sri Lanka’s single biggest export market. In 2020, Sri Lanka’ exports to the US amounted to US$ 2.66 billion. Except for India, all other major importers from Sri Lanka were from Europe, an ally of the US.

As a collectivity, the European Union accounts for 22.4% of Sri Lanka’s exports. In 2020, the UK imported US$ 956.07 million worth of goods from Sri Lanka to occupy the second place in the list of Sri Lanka’s overseas markets. Germany was fourth, with imports valued at US$ 611.7 million); Italy, fifth (US$ 477.32 million); Belgium sixth (US$ 313.33 million); and Netherlands seventh (US$ 307.39 million).

These high annual figures are very largely due to the GSP Plus tariff concession given by the EU to Sri Lanka. Before further extending the GSP Plus concession the EU is to send an inspection team to Sri Lanka soon. The Lankan government is expected to go the extra mile to please the EU team in view of the importance of the GSP-Plus concessions for the very survival of the garment industry which is a top contributor of dollars to the national kitty.