Is China Doing A Myanmar In Sri Lanka?

Is China doing a Myanmar in Sri Lanka by capitalising on the policy ofPresident Mahinda Rajapaksa of diversifying Sri Lanka's geo-political optionseven while professing close friendship with India?

That seems to have been one of the concerns of the government of India, whichprompted a two-day visit to Sri Lanka by a team of senior advisers of PrimeMinister Dr Manmohan Singh consisting of Shri M.K.Narayanan, the NationalSecurity Adviser, Shri Shivsankar Menon, the Foreign Secretary, and Shri VijaySingh,  the Defence Secretary, on June 20 and 21, 2008, for talks with MrRajapaksa and senior Sri Lankan officials and important Tamil leaders.

Officially, the visit was projected as a return visit to reciprocate asimilar high-level visit to New Delhi in September last by a  Sri Lankandelegation headed by Mr Gothbaya Rajapaksa, the Defence Secretary, and as apreparatory visit before the forthcoming 15th summit of the  South AsianAssociation for Regional Co-operation (SAARC) to be held at Colombo from July 27to August 3,2008.

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

Sri Lanka had successfully hosted the 6th SAARC summit at Colombo in 1991 andthe 10th in 1998 and had provided effective security to the leaders of theparticipating countries. The 15th summit will be held at a time when a largenumber of the Sri Lankan security forces are engaged in an operation tore-capture the control of the Northern Province from the LTTE. Facing increasingpressure from the security forces, the LTTE has stepped up attacks withexplosives on soft targets in areas in and around Colombo. Moreover, itsbringing into action its planes for air strikes since March last year and theinability of the Sri Lankan security forces to identify where these planes arekept and wherefrom the air attacks are being launched and to intercept them havemade the pre-summit security scenario in Colombo worrisome.

While the LTTE is unlikely to target the summit or its participants, thesummit could provide it with an opportunity to create drama in order to proveits prowess and disprove the claims of the government that the LTTE has beenweakened beyond recovery. Will the Sri Lankan security forces be in a positionto provide effective security to all the participants in general and to theIndian Prime Minister in particular? One of the purposes of the visit of theIndian team seems to have been to make an assessment in answer to this question.

Another purpose seems to have been to assess the implications to India of MrRajapaksa's policy of bringing in other external state actors into Sri Lanka inorder to give Sri Lanka a more geo-political wriggle room. In the past, Indiahad to worry only about China, Pakistan and the US. Now, Mr Rajapaksa hasstarted courting Iran, Saudi Arabia and Malaysia. Iran has started playing animportant role in the oil refining sector and it is only a question of timebefore it starts demanding a role in the retail sale of oil, a sector in whichthe Indian Oil Corporation presently has a pre-eminent role. To counter thefears of the US and the Sunni Arab states over his flirting with Iran, he hasalso been trying to bring in Saudi Arabia in the oil sector. Malaysia emergedlast 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 Lankagradually shrinking.

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

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

The action of the government of Myanmar in allowing the Chinese to have asemi-permanent presence in the Coco Islands brought the Chinese withinmonitoring distance of India's space establishments on the Eastern coast. Thesemi-permanent presence, which the Chinese  are now getting in Sri Lanka,will bring them within monitoring distance of India's fast-breeder reactorcomplex at Kalpakam near Chennai, the Russian-aided Koodankulam nuclear powerreactor complex in southern Tamil Nadu and India's space establishments inKerala.

Reporting on the visit of the senior Indian officials to Colombo, the Timesof India of June 23,2008, quoted an unnamed senior Indian official in NewDelhi as stating as follows: "The story of Myanmar is being repeated in SriLanka. China is already all over the island nation, with a flurry of arms deals, oil exploration and construction projects like the Hambantota port."

The Times of India also reported as follows: "Colombo has signeda US $ 37.6 million deal  with the Beijing-based Poly Technologies for awide variety of arms, ammunition, mortars and bombs. Sri Lanka is also gettingsome Chinese Jian-7 fighters, JY 11-3D air surveillance radars, armouredpersonnel carriers, T-56 assault rifles ( a copy of AK-47), machine guns andanti-aircraft guns, rocket-propelled grenade launchers and missiles."

The work on the Hambantota port is progressing fast with typical Chineseefficiency. Sri Lankan sources assert that it will be only a commercial port andnot a potential naval base. One has to wait and see.

The Hambantota port  construction is estimated to cost US $ one billionto be lent by the Exim Bank of China. The entire project is expected to becompleted in 15 years in four phases. The first phase of construction, , whichwas started in October,2007, is estimated to  cost US  $450 million. Theentire project, inter alia,   provides for the construction of agas-fired power plant project, a ship repair unit, a container repair unit, anoil refinery and a  bunkering terminal. The bunkering terminal, which  is expected to be completed in 39 months, provides  for the terminal tohandle up to 500,000 metric tonnes (mt) of oil products a year.

The Daily News of Sri Lanka reported on June 19, 2008, as follows: 'Aproject proposal sent by the China Huanqiu Contracting and EngineeringCorporation for building the bunkering facility and tank farm at the Hambantotaharbour has been approved by the project committee and the cabinet-appointednegotiations committee. "The total value of the project would be $76.5million and it would be completed by 2010.A set of fuel tanks, bunkeringfacilities, aviation fuel storage facilities and liquefied petroleum gas (LPG)storage facilities will be built under  the project at Hambantota, about230 km south of Colombo. The media has also reported that although theHambantota port was initially planned as a service and industrial port, it isexpected to be developed as a trans-shipment port at a later stage to handle 20million containers per year.

Neither India nor China has so far started oil/gas exploration work in theone block each in the Mannar area awarded to them by the Rajapaksa governmentwithout bidding as a gesture of goodwill. The Oil and Natural Gas Corporation (ONGC),which was offered the block allotted to India without bidding, said in Septemberlast that  it was not interested in the assigned block, due to  lowprospectivity and the fact that Sri Lanka was asking for a big  bonus inreturn for this gesture. The Sri Lankan government  said it would negotiatewith the ONGC for a new oil block with greater prospectivity. It is not knownwhether the Chinese are satisfied with the block offered to them without biddingand , if so, when they would start the exploration.

Foreign oil companies have not so far been enthusiastic over the prospects offinding 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 toIndia, received bids from  ONGC Videsh, Cairn India, and Niko Resources ofCyprus. ONGC Videsh is a subsidiary of the state-owned Oil and Natural GasCorporation of India.Cairn India, is 69 per cent owned by  Cairn Energy ofLondon, which has been active in India, Nepal and Bangladesh.Canada-based NikoResources is active  in Canada, India and Bangladesh. Block  No. 2received  bids from both Cairn India and Niko Resources while Block 3, thelargest being 4,126.51 sq. km in size, received a bid only from  Niko. Noneof these blocks received any bid from China. The Sri Lankan government announcedon June 6,2008, that after evaluation it has decided to accept the bid of CairnIndia  for block No. 1 and invited it to send its representatives toColombo 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 bidsbefore evaluation.

In response to an invitation issued by President  Rajapaksa  duringhis visit  to Teheran in November, 2007. President Mahmud Ahmadinejad ofIran paid a two-day official visit to Sri Lanka on April 28 and 29, 2008.Sincelast year, Sri Lanka has been facing  economic difficulties due to thedrying-up of economic assistance from countries of the European Union (EU) suchas Germany  because of what they perceive as the indifferent attitude ofthe Rajapaksa government to complaints regarding the  violation of thehuman rights of the Tamils and its refusal to seek a political solution to theproblem.  Instead of succumbing to the EU pressure on the subject, the Rajapaksa government turned  for increased assistance to othercountries such as China and Iran, which did not raise human rights issues as acondition for such assistance. Assistance from Iran  was of crucialimportance to Sri Lanka because of the government's inability to pay for itsincreasingly costly oil imports.The Goverenment of Ahmadinejad readily agreed toprovide oil  at concessional rates to Sri Lanka and to train a small teamof officers of the Sri Lankan Army and intelligence in Iran. It also agreed toprovide a low-interest loan to Sri Lanka to enable it to purchase defence-relatedequipment from China and Pakistan. In addition, it agreed to invest US $ 1.5billion in energy-related projects in Sri Lanka. One of these projects is forthe production of hydel power and the other to double the capacity of anexisting oil refinery in Sri Lanka. Work on the construction of the hydelproject started during Mr  Ahmadinejad's visit. Iranian engineers havealready been preparing the project report for doubling the capacity of therefinery and for modifying it to enable it to refine in future Iranian crude tobe supplied at concessional rates. The existing capacity is 50,000 barrels aday.

Mr Abdul Hameed Mohamed Fowzie, Sri Lanka's Minister for  Petroleum andPetroleum Resources Development, visited Riyadh in Saudi Arabia towards the endof March,2008. He announced at Riyadh on March 23,2008, that Saudi Arabia hadagreed to train Sri Lankans in the field of exploration and refining of oil inthe island. He told the media at Riyadh: "We had fruitful discussions with mycounterpart here and we are happy that the Kingdom has agreed to cooperate withSri Lanka in areas of mutual interests in the field of oil supply, explorationand investments.We have plans to improve our refining capacity from 50,000 to100,000 barrels a day and getting Saudi expertise for the proposed expansionwill facilitate the successful implementation of the project. Sri Lanka needs a cracker to convert crude into diesel and petrol which would cost the governmentsome $400 million. I have requested my  counterpart to recommend that theOPEC Fund assist us  in the purchase of this plant."

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

B. Raman is Additional Secretary (retired), Cabinet Secretariat, Govt. ofIndia, New Delhi, and, presently, Director, Institute For Topical Studies,Chennai. He is also associated with the Chennai Centre For China Studies.