Wide Angle Focus on Sri Lanka’s Balancing Act between India and China

• 5opn1
• December 22, 2024
• Weekly Political Review
• Wide Angle Focus on Sri Lanka’s Balancing Act between India and China
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Weekly Political review

New Government Seeks to Navigate Rivalries and Secure Stability amid Economic Recovery

By Rohana Jith

Sri Lanka is now walking on a delicate tight rope between its relations with India on the one hand and China on the other. The new government led by President Anura Kumara Dissanayake is now faced with the challenge of maintaining solid ties with all the countries without alignment with any camp or country. On the one hand, India is assertive that bilateral cooperation should be based on its ‘Neighbourhood First’ policy and SAGAR outlook. On the other hand, China is increasingly hopeful of advancing its relations with Sri Lanka further under the new government in terms of what is called ‘strategic partnership cooperation’
Historical Bonds with India and China: A Legacy of Dependence

Sri Lanka has long relied on India and China, two of its most steadfast allies since independence. The 1952 Rubber-Rice Pact with China remains a testament to this, where a barter agreement ensured food security for the island amid a global rice shortage. China’s willingness to pay above-market prices for Ceylon’s rubber came at a time when Western nations, including the United States, offered no support. On the other hand, India played a crucial role during the country’s more recent crises, such as providing a $4 billion credit line in 2022 when Sri Lanka faced its worst economic meltdown.

While these relationships have bolstered Sri Lanka during critical periods, the rivalry between India and China creates a precarious balancing act for the island nation. Both nations have historically competed for influence in Sri Lanka, which occupies a strategic position in the Indian Ocean. This competition intensified after Sri Lanka’s economic collapse in 2022, where Western narratives about China’s “debt trap diplomacy” clashed with India’s overtures for stronger bilateral ties.

India’s Role: A Pillar of Support

India has consistently demonstrated its commitment to stabilizing Sri Lanka. During his first state visit in December 2024, President Anura Kumara Dissanayake (AKD) prioritized discussions with Indian Prime Minister Narendra Modi on economic cooperation, energy development, and regional security. Modi announced initiatives including liquefied natural gas (LNG) supplies to Sri Lankan power plants and a proposal to connect the two countries’ power grids. These engagements underline India’s strategic interest in ensuring Sri Lanka does not fall entirely under Beijing’s sway.

Sri Lanka’s proximity to India has also fostered strong political, cultural, and military ties. Analysts suggest that AKD’s decision to make India his first international visit reflects a calculated effort to align with a historically supportive neighbor. However, challenges remain, such as Indian concerns over China’s maritime activities in Sri Lankan waters, including the leasing of Hambantota Port to China for 99 years.

China: An Indispensable Economic Partner

Despite India’s substantial support, China’s role in Sri Lanka’s economic recovery cannot be understated. Accounting for more than half of Sri Lanka’s bilateral debt during its 2022 crisis, China’s financial assistance has been critical. President Dissanayake plans to visit China in early 2025 to seek further debt restructuring and relaxed repayment terms.

China’s interests in Sri Lanka stem from its strategic position along vital maritime routes. Beijing’s Belt and Road Initiative (BRI) investments, including port development and infrastructure projects, have deepened its footprint in the region. However, Sri Lanka’s reliance on Chinese loans has led to accusations of overdependence, with critics pointing to the Hambantota Port deal as a cautionary tale.

A Delicate Balancing Act: Navigating Geopolitical Rivalries

President Dissanayake faces the monumental task of balancing relations with India and China. Sri Lanka’s strategy appears to hinge on fostering strong ties with both powers while avoiding actions that could jeopardize either relationship. Dissanayake’s administration has pledged not to allow Sri Lanka’s territory to be used for activities detrimental to India’s security. Simultaneously, it has resisted initiatives perceived as overly favoring India, such as Adani Group’s involvement in port and energy sectors.

Domestic Politics: A Need for Stability and Reform

Amid these external challenges, Sri Lanka’s domestic political landscape is equally turbulent. The newly elected National People’s Power (NPP) government faces immense pressure to deliver on its promises of anti-corruption, economic recovery, and equitable growth. Key issues, including food shortages, high prices, and pension disputes, dominate public discourse. Parliamentary debates have also been marred by controversies over liquor licenses and allegations of falsified qualifications among politicians, detracting from more pressing national concerns.

Navigating Economic Realities

Sri Lanka’s economic recovery hinges on its ability to secure investments and rebuild public trust. While the International Monetary Fund (IMF) rescue package has provided a temporary lifeline, the implementation of austerity measures has drawn criticism. Inclusive growth remains a priority for Dissanayake’s administration, as rising inequality threatens to destabilize the fragile social fabric.

AKD’s government has also faced scrutiny over its approach to foreign vessels conducting research in Sri Lankan waters. Ending a moratorium on such activities has drawn criticism from India, highlighting the broader geopolitical implications of maritime policy. The government’s efforts to balance transparency with strategic imperatives will be closely watched.

Toward a Balanced Foreign Policy

Sri Lanka’s strategic location ensures it will remain a focal point of India-China rivalry. President Dissanayake’s diplomatic engagements indicate a commitment to balancing these relationships while prioritizing national interests. The government’s assurances to India on security concerns and its pursuit of debt relief from China reflect a nuanced approach.

However, challenges persist. The rivalry between India and China could place Sri Lanka in a precarious position, especially if external pressures escalate. Sri Lanka’s ability to maintain a neutral stance while securing economic and strategic benefits from both nations will determine the success of Dissanayake’s foreign policy.

Conclusion: A Path Forward

As Sri Lanka navigates its complex geopolitical and economic landscape, the stakes could not be higher. President Dissanayake’s administration must address domestic challenges while managing the expectations of its powerful neighbors. Success will require a careful balance of diplomacy, transparency, and strategic foresight to ensure that Sri Lanka emerges as a resilient and independent player on the global stage.