Sri Lankan foreign policy over the last 15 years, especially after the end of the civil war in 2009, can be described as a series of desperate attempts to balance the interests of major powers that have a keen interest of the country, which is strategically located at the heart of the Indian Ocean.
The post-2009 agreements with competing countries, which have drawn Sri Lanka into the tensions between China and the United States and its allies, can be directly linked to the country’s economic woes.
With the liberalization of the economy, the gap between export earnings and import expenditure has been rising, with Sri Lanka now having a serious balance of payment crisis. The largest part of the country’s foreign loan portfolio, estimated to be nearly 50 percent, is made up of dollar-denominated international sovereign bonds, followed by debts to the Asian Development Bank, Japan, China and the World Bank.
To address its balance of payment issue, the Mahinda Rajapaksa administration, which governed Sri Lanka between 2005 and 2015, attempted to secure financial lifelines from China and an injection of FDI through China’s Belt and Road Initiative (BRI). Rajapaksa hails from the Sri Lanka Freedom Party (SLFP,) which has historically been close to China. By 2018, Sri Lanka had secured up to $8 billion in BRI financing from China, for the construction of major infrastructure projects.
Of these projects, the most visible and important are the Colombo International Financial City (CIFC) and the Hambantota port and adjoining industrial estate. Built on reclaimed land, CIFC is expected to serve as Sri Lanka’s financial and business district by 2030. Meanwhile, Hambantota port, which lies close to sea lanes through which two-thirds of China’s oil imports pass, is essential for China’s energy security.
Geopolitics Meets Domestic Politics
While both Sri Lanka and China insist that these projects have no strategic, military or political dimension, the U.S. and its allies are not convinced.
India and the U.S. tried to counter the Chinese projects during the United National Party (UNP) administration from 2015 to 2019. The UNP, led by former Prime Minister Ranil Wickremesinghe, has traditionally been pro-Western; under its tenure, Sri Lanka signed a number of bilateral and multilateral agreements with the U.S. and its partners. Washington clearly wants Colombo to be a part of a united military front between the U.S. and India in the Indo-Pacific.
India, worried that the Hambantota port could one day become a Chinese military base, tried to gain control over the country’s other strategic seaports, develop an oil-tank farm in Trincomalee, and build a container terminal at Colombo port in partnership with Japan, next to a Chinese terminal built as part of the BRI. India also pushed the Economic and Technology Co-operation Agreement, an addendum to the existing free trade agreement between the two nations that extends it to trade in services and the service sector.
In 2019, the previous government also applied for a grant from the U.S. Millennium Challenge Corporation and negotiated two agreements with the U.S. that would have increased military engagement between the two countries: the Acquisition and Cross Services Agreement (ACSA) and the Status of Forces Agreement (SOFA).
However, while the Chinese projects have gone through with relatively little resistance, there has been significant opposition to the previous government’s agreements with India and the U.S. Even the 2015 United Nations Human Rights Council Resolution, co-sponsored by the U.S. and the former Sri Lankan government, which granted the U.S. the ability to influence constitutional reform and internal governance, including of the security and judicial sectors, has hardly been implemented due to domestic pressure.
This resistance, especially from the Sinhala Buddhist majority, was particularly strong among the SLFP and its offshoot, the Sri Lanka Podujana Peramuna (SLPP). Former President Maithripala Sirisena, a member of the SLFP, has said on record that one of his main reasons for attempting to dismiss Wickremesinghe as prime minister in November 2018 was the disagreement on giving India control of the island’s ports. Wickremesinghe had wanted the East Container Terminal of the Colombo Port to be developed with Indian investment.
Meanwhile, Washington’s $480 million MCC grant, as well as the talks on the ACSA and SOFA, have also faced setbacks due to domestic political concerns. These are agreements that are of great importance not only to the U.S., but also to India, Japan and Australia, as they give shape to the crucial Indo-Pacific strategy.
Since the election of Gotabaya Rajapaksa as the president of Sri Lanka last year, the government has once again deepened its relationship with China. His administration has also pulled the plug on a light rail transit system that was to be financed and constructed by Japanese entities. It is believed that the construction of the project will now be handed over to a Chinese company.
Pressure has been mounting on the island nation over the past few months, as the Chinese projects go forward without a hitch while past agreements with India and the U.S. languish. For example, India has pressed the Rajapaksa administration to make a decision on the East Container Terminal of the Colombo Port.
On August 26, meanwhile, the U.S. State Department announced sanctions against 24 Chinese state-owned enterprises, including several subsidiaries of the China Communications Construction Company (CCCC), which are involved in BRI projects in Sri Lanka. The American efforts also come at a time when Sri Lanka has been lobbying for international investment in Chinese-led infrastructure projects.
On August 30, U.S. Defense Secretary Mark Esper telephoned President Rajapaksa, and later tweeted that he had urged the Sri Lankan leader to make continued progress on reconciliation and human rights. This can also be viewed as a veiled threat that the U.S. could again exert pressure on Sri Lanka at international human rights fora. This is significant, as Gotabaya was the defense secretary (and a U.S. citizen) during the last phase of the country’s civil war. U.S. Secretary of State Mike Pompeo will arrive in Sri Lanka for a short visit on October 27 and he is to offer Sri Lanka some options for partnering with the U.S. on economic development.
Time to Choose
There is a widespread belief among Sri Lankan policy wonks that the country’s nonaligned foreign policy allowed the country to navigate the Cold War relatively unscathed, and that this can be again replicated through proper policy initiatives.
However the Sino-American rivalry is not just a Cold War 2.0, and the Non Aligned Movement (NAM) isn’t what it used to be. NAM is no longer the relatively unified block it was and some of its giants, like India, have been compelled to take sides.
In one of the most definitive works on alliance formation, “The Origins of Alliances,” Stephen M. Walt speaks about the factors that make states engage in balancing and bandwagoning behavior. Walt defines balancing “as allying with others against the prevailing threat,” while bandwagoning refers to “alignment with the source of danger.” Walt states that while stronger nations often prefer balancing to ensure that no one country achieves overwhelming dominance, a weaker state is more likely to bandwagon than balance, “because weak states add little to the strength of a defensive coalition but incur the wrath of the more threatening states nonetheless.” He also adds that states will be tempted to bandwagon when allies are simply unavailable: “if weak states see no possibility of outside assistance, however, they may be forced to accommodate the most imminent threat.” Finally Walt says that states are more likely to balance in “peacetime or in the early stages of a war,” but once the outcome appears certain, “some will be tempted to defect from the losing side at an opportune moment.”
Sri Lanka is a weak country without any assurance of protection from major powers; it has no defense treaty with any country. On the other hand, neighboring countries are seemingly taking sides between China and the U.S. and its partner, India. This means that there is no effective system of diplomatic communication, which is a prerequisite for balancing behavior, as it allows potential allies to recognize their shared interests and coordinate their responses. This is a stark difference from the Cold War period, where NAM ensured such diplomatic communication and a clear non-aligned bloc existed. All this makes balancing behavior increasingly less feasible, despite the desire of the political establishment and recommendations of political and international relations scholars, as the great bifurcation takes place.
In the coming years, Sri Lanka, like many of its South Asian neighbors, will be forced to pick a side as China-U.S. relations continue their downward spiral.
Rathindra Kuruwita is a journalist and a researcher from Colombo, Sri Lanka. He holds a MSc in Strategic Studies from S. Rajaratnam School of International Studies, NTU, Singapore.