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Silent in SL’s hour of need, China now provokes India

03 Aug 2022

BY N. Sathiya Moorthy Going on twin-engines, China has chosen Sri Lanka to take on India and the US on strategic and economic fronts, respectively – that too after months of deafening silence when the island nation was appealing for food, fuel, and forex, to which only its Indian neighbour responded.  In doing so, China has told India, without naming it, that New Delhi should not interfere with Beijing’s “legitimate maritime activities”. In the same vein, China also took on the US on matters other than Taiwan, for ridiculing Beijing’s “debt diplomacy… that has led to bankruptcy in Sri Lanka”. After The Hindu reported the Sri Lankan Defence Ministry’s initial denial of sorts, the newspaper has since quoted the Ministry Spokesperson as having said that the Chinese vessel, Yuan Wang 5, was after all visiting Hambantota. “The vessel will be in Hambantota from 11-17 August, mainly for replenishment, including fuel,” The Hindu quoted Col. Nalin Herath. An earlier report on the website of China’s Belt and Road Initiative Sri Lanka (BRISL) stated that Yuan Wang 5 would be in Hambantota for a week and “will conduct space tracking, satellite control, and research tracking in the northwestern part of the Indian Ocean region through August and September,” but without citing any sources. There is, thus, no clarity as to whether the vessel would undertake scientific studies in the ocean and space areas, respectively closer to and above Indian territory.   The question thus remains as to whether China is keeping Sri Lanka (mostly) out of the loop, or if the bilateral Hambantota pact(s) even provides for sharing such information. As The Hindu report pointed out, Sri Lanka’s Defence Ministry did not explain why it had earlier denied the vessel’s arrival, but quoted Col. Herath as saying that “such vessels periodically come from various countries such as India, China, Japan, and Australia. It is nothing unusual”. Indian concern This is the first time that China has aroused Indian concerns vis-à-vis Sri Lanka in recent years after the host nation’s economy hit a tailspin, leading to an unprecedented political crisis, causing the forced exit of President Gotabaya Rajapaksa, his brother and Prime Minister Mahinda Rajapaksa, and also their other siblings and relatives, all from the Government – and in the reverse order. This is also a major strategic issue after China’s 2020 Galwan massacre. Reacting to the early reports on the Chinese vessel, Indian External Affairs Ministry Spokesperson Aridam Bagchi said in New Delhi: “The (Indian) Government  carefully monitors any developments having a bearing on India’s security and economic interests, and takes all necessary measures to safeguard them.” He did not elaborate, but added: “I think that should be a clear message.” However, Indian anxieties over Sri Lankan conduct vis-à-vis China’s strategic interference in the shared waters have a precedent in the visit of the Chinese nuclear-powered submarine Changzheng 2 to Colombo Port in 2014, and then-President Mahinda Rajapaksa’s regime not taking New Delhi into confidence in good time or voluntarily, as should have been the case. Though the Rajapaksas are generally blamed for inviting China into Sri Lanka with their high-interest, “white elephant” projects, it is current President Ranil Wickremesinghe, as then-Prime Minister, who actually converted what was still a construction-cum-concession contract into a 99-year-lease in 2017. As Prime Minister under President Maithripala Sirisena (2015-2019), with whom he had a cat-and-mouse relationship, Wickremesinghe also borrowed more money from China for more expressways than what the Rajapaksas had borrowed, with no expectation, hence a sign of substantial revenues was required to at least service a part of the credit owed to Beijing on the project. ‘Boosted’ Sri Lankan economy In an even more significant aspect of traditional Chinese assertion that was absent for long, Beijing also defended its massive infrastructure ventures and investments in Sri Lanka and said that they have “boosted” its economic development.  Chinese Foreign Ministry Spokesman Zhao Lijian told a media briefing in Beijing the following, responding to US criticism that China’s unproductive projects and opaque loan deals were among the major causes for the island nation becoming “bankrupt”.    “Chinese projects have boosted Sri Lanka’s economic development, and brought tangible benefits to the Sri Lankan people,” he said while responding to a question on the criticism of China’s projects and policies toward Sri Lanka by US Agency for International Development (USAID) Administrator Samantha Power. In New Delhi, Power recalled how India reacted “really swiftly” with an absolutely critical set of measures to help Sri Lanka tide over its economic crisis, recalling how Colombo’s calls to China to provide significant relief had gone unanswered. Refuting Power’s charge that China had become one of Sri Lanka’s “biggest creditors”, offering often “opaque loan” deals at higher interest rates than other lenders and in response to her questioning whether Beijing would restructure the debt to help the island nation, Spokesperson Zhao would only say: “What China provides for Sri Lanka are almost preferential loans with low-interest rates and long terms, which have played a positive part in improving Sri Lanka’s infrastructure and livelihood.”  He went on to add how “there are multiple components to Sri Lanka’s foreign debt, where China-related debts take a far less share than the international capital market and multilateral development banks”. As if taking the war of words to the rival camp, Zhao stressed that the “global economic and financial markets have taken a heavy toll as the US’s recent sudden interest rate hikes and balance-sheet reduction has siphoned off dollars more rapidly – a reversal from the long-running quantitative easing policy and irresponsible massive stimulus”.  Likewise, without directly referring to the US-led sanctions on Russia in the wake of the Ukraine war he said: “The US’s unilateral sanctions and tariff barriers have undermined the security of industrial chains and have worsened the price surge of energy, food, and other commodities. This has further aggravated the financial and economic situation of many developing countries, including Sri Lanka.” Yet, Spokesperson Zhao seemed to be careful to not commit himself to future Chinese assistance and credit-restructuring required for the International Monetary Fund (IMF) “bail-out package”. Sri Lankan news reports have since spoken about China’s Exim Bank commencing credit-restructuring negotiations with Sri Lanka, but only after months of reluctance.  Recently, they also spoke about Sri Lanka’s Ambassador to China Palitha Kohona, the nation’s war-time Secretary to the Foreign Ministry, seeking a $ 4-billion emergency aid package from Beijing and also help to boost trade, investments, and tourism. China has also reportedly promised Sri Lanka of its support in obtaining IMF assistance. And the IMF’s conclusions after negotiations with Sri Lanka would remain that aid, if any, would be from Western nations and other “independent financial institutions” like the World Bank. Simply nothing China’s debt-restructuring becomes a critical component especially after IMF Chief Economist Pierre-Olivier Gourinchas reiterated in a Twitter discussion that Sri Lanka must reach an agreement with its creditors before the IMF can step in and provide financial assistance. “Sri Lanka had a balance-of-payment crisis. The foreign exchange reserves ran dry and there was nothing they could use to pay for basic necessities and pharmaceuticals and energy.” For its part, however, the Sri Lankan President’s Media Division asserted that the Government has made significant progress in negotiation with the IMF. Blaming it on the wrong policies of the previous Government of President Gotabaya Rajapaksa and also the political instability that delayed the negotiations until recently, the statement said that the formation of a “politically-stable government” under President Wickremesinghe and his initiative to form an all-party regime would help. However, it did not address the IMF’s core concern regarding overseas debt restructuring, involving multiple lenders.  Wishy-washy What more, almost simultaneously, the World Bank has announced that it has no plans to offer funds to Sri Lanka until it has put a “macroeconomic policy framework” in place. Translated, between them, the IMF and the World Bank are addressing two critical areas that caused Sri Lanka’s economic collapse – external debt and domestic policies. It is going to be more difficult than already and equally time-consuming. With the Ranil Government being seen as wishy-washy over the Chinese ship’s Hambantota visit, it remains to be seen how enthused India would be to rush aid and assistance with the same amount of enthusiasm as through the past months, though New Delhi’s commitment to help the Sri Lankan population would remain. The question is as to whether Colombo would come clean with New Delhi on the Chinese vessel, and if so, how early or how late, and also regarding how eager Beijing is ready to rush massive quantities of aid continuously for months, and/or push credit restructuring – two issues regarding which Beijing has said simply nothing, thus far! (The writer is a Chennai-based political analyst and commentator) ………………………………….. The views and opinions expressed in this article are those of the author, and do not necessarily reflect those of this publication.      


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