Sri Lanka Suddenly in Play as Indian Ocean Fulcrum
New premier needs a non-aligned foreign policy
By: Salman Rafi Sheikh
Sri Lanka’s newly elected president, Anura Kumar Dissanayake, has dramatically upset the traditionally dominant parties’ hold on politics, destabilizing the country’s foreign policy, with major consequences for the question of economic recovery and for great-power politics in South Asia as the contest for primacy heats up in the Indian Ocean.
In 2022, Sri Lanka, which has been the victim of disastrous economic and political mismanagement, defaulted on its debt and suspended payments on around US$78 billion in foreign and domestic loans. In the middle of the previous decade, the country came to be regarded as a poster boy for the concept of a Chinese debt trap, with a host of white elephant projects including the US$1.4 billion Colombo Port City project, the Hambantota Port, Mahinda Rajapaksa International Airport (MRIA) and a cricket stadium in the former president Rajapaksa’s political constituency, all of which were feared to put the country in thrall to Beijing in perpetuity, with considerable political consequences for the region.
Following a string of mammoth protests that eventually culminated in a takeover of his official residence and workplace by protestors, Prime Minister Gotabaya Rajapaksa fled the country, accompanied by his spouse and a personal security detail. Ever since, the country’s ‘recovery model’ has been little more than an IMF bailout package and deals for restructuring debt payments with international creditors, including China. Now, a left-leaning president in power has stirred tensions across capitals in the region and beyond. His election campaign promised to renegotiate the US$2.9 billion deal with the IMF. Existing perceptions also paint him as pro-China.
In my talks with leaders of Dissanayake’s Janatha Vimukthi Peramuna (JVP) party over the past few years, it wasn’t difficult to discern deep anti-India (and pro-China) sentiment shaping the party’s worldview. Still, Dissanayake, the leader of the leftist Janatha Vimukthi Peramuna (JVP), can’t ignore India. Even before he became president, Dissanayake was invited to visit New Delhi, which wanted to see if they could get on board with him in the event of his victory. Now that he is in power, India is already making moves to prevent him from moving too much to Beijing’s side.
On October 4, Sri Lanka announced a new US$14 billion debt restructuring deal with its sovereign bondholders, which India played a key role in facilitating. That was followed immediately by the Indian Foreign Minister’s visit to Colombo and meetings with the president and his (interim) ministers. A key issue that Jayshankar highlighted was India as an alternative to China. Clearly, New Delhi cannot sit idle. With Hasina’s violent exit from Bangladesh and Maldives ordering Indian troops to leave, New Delhi’s position in the region has received several hits recently. It cannot afford Sri Lanka tilting too much towards Beijing.
There is, however, a concern in Beijing. A recent report in Global Times, a mouthpiece of the Communist Party of China, described the Indian mindset vis-à-vis Sri Lanka as “hegemonic” that requires regional countries to stick to an “India First” policy.
But China’s concerns are not limited to New Delhi. They also include Washington, which sees Sri Lanka as pivotal to its Indian Ocean policies. Washington’s 2022 Integrated Country Strategy describes Sri Lanka as a “fulcrum of the Indo-Pacific” in which Chinese investments pose “threats.” Washinton, therefore, is “committed to defending our strategic interests and values in Sri Lanka.” It has been indirectly involved in this defense via the IMF. Unsurprisingly, Washington was quick to send its ambassador to Sri Lanka to meet Dissanayake within days of his election. On October 10, the Commander of the US Pacific Fleet Stephen Koehler also met Dissanayake.
Amid this flurry of activity, China’s Xi has already shared his intent to deepen the Belt and Road Initiative in Sri Lanka, which might mean the former pushing aggressively for more economic space i.e., projects, in the near future. Xi also expects to see China’s ties with Sri Lanka making “new progress” and most observers of Sri Lankan politics expect Dissanayake to extract maximum support from Beijing.
This is exactly the context in which Dissanayake’s campaign call for renegotiating the terms of the IMF program was read and understood. He never said anything about renegotiating with China, including the 99-year lease on Hambantota port which military strategists fear gives China a significant footprint on the Indian Ocean.
Although Dissanayake has yet to meet Chinese officials or unveil his China policy, it is believed that he will be more explicit about China after the November parliamentary elections. Naturally, he doesn’t want to upset India and the IMF before elections, for any pre-election economic or financial trouble can damage his party’s parliamentary prospects.
But should Dissanayake’s policy be to favor China at the expense of ties with India and the US? Alternatively, should his policy be to jump on the Indo-US bandwagon of ‘China containment’ and extract maximum benefits? As it stands, he cannot afford an exclusive approach.
Colombo owes China almost 11 percent of its external debt, which means Beijing has powerful strings to pull whenever, and if, Sri Lanka seeks to move away. India, on the other hand, is Sri Lanka’s largest external investor. Sri Lanka also depends on India for refined petroleum. The shortage of petroleum was a key trigger of mass protests in Sri Lanka in 2022 that led to Rajapaksa’s exit. Dissanayake can’t afford to annoy the IMF either, because its support is the lifeline for the island country.
Non-Alignment 2.0
With two blocs vying for power to influence Sri Lanka’s trajectory, the latter’s interests will be better served with a non-aligned foreign policy. This is especially crucial because of the current polarized global environment vis-à-vis issues ranging from Ukraine and Russia to Gaza/Israel and the emerging prospects of an ‘Asian NATO’ in the Indo-Pacific region to tackle China.
Dissanayake would be better off if he were to declare non-alignment openly and not seek to play any role in helping to mediate conflicts, including those between China and India/US. Notwithstanding his party’s long-standing ideological affinity with Marxism – which puts it closer to China – this is not what the country requires at the moment. Instead of achieving any Marxist ideals, Dissanayake’s future as president and the prospects of Sri Lanka coming out of default would be better served if the new government were to follow a pragmatic – and balanced – approach. Dissanayake has reiterated his position that his country doesn’t want to be “sandwiched” between two opposing blocs. In practice, this position would not be better served if he were to continue to push for renegotiating with the IMF without seeking similar concessions from Beijing. Notwithstanding Xi’s ideas for deepening BRI, the Dissanayake government should not seek to start new projects at this stage. It is unnecessary and would invite IMF additional scrutiny. Since Beijing does not like sharing its project details and terms and conditions, Colombo would end up in a damaging crossfire.
As irony would have it, there is a great deal that Sri Lanka can learn from India’s balancing act between the US and Russia. Indeed, while Sri Lanka is obviously not as powerful as India, Colombo, within the present ‘Cold War 2.0’, scenario can position itself as non-aligned, where pragmatism trumps other ‘isms.’