Sri Lanka finds itself at the heart of a geopolitical tug-of-war between China and India, with far-reaching implications across the Indo-Pacific region. President Anura Kumara Dissanayake’s visit to New Delhi in December 2024 underscored the delicate balance the island nation must maintain.
In a public assurance to Indian Prime Minister Narendra Modi, Dissanayake unequivocally stated that Sri Lanka would not allow its territory to be used in any way detrimental to India’s security. Yet, this commitment is under strain as Colombo wrestles with the pressures of economic dependence on China, particularly in light of the controversy surrounding Chinese research vessels docking at Sri Lankan ports.
These vessels, often classified as dual-use platforms with civilian and military functions, have raised significant security concerns in India and among Western powers. In the recent past, the docking of the Yuan Wang 5 and Shi Yan 6 vessels sparked apprehensions due to their advanced surveillance capabilities, which India perceives could be used to monitor its defence infrastructure.
India’s apprehensions are not unfounded. Such ships reportedly possess advanced tracking capabilities for missiles and satellites and could significantly compromise India’s strategic assets in the Indian Ocean.
Security analysts have noted that such vessels are often used to gather intelligence on naval activities and defence installations. To address growing Indian apprehensions, Sri Lanka implemented a year-long moratorium on foreign research vessels docking at its ports in 2024, a move partly influenced by India's insistence during earlier high-level meetings.
Sri Lanka’s economic crisis has deepened its reliance on Chinese investments, with Beijing accounting for over 20 percent of its external debt in 2022. China's financial leverage is evident in its significant infrastructure investments, such as Sinopec’s $4.5 billion Hambantota refinery project. While providing much-needed financial inflows, these investments have also restricted Colombo’s ability to outright deny docking requests from Chinese vessels.
China’s broader strategic goals
China’s strategic interest in Sri Lanka extends beyond research vessels. Its “Look South” policy aligns with its broader ambitions in the Indo-Pacific, seeking to secure influence in key maritime zones. With its prime location along these routes, Sri Lanka is an essential asset in this strategy.
To advance these objectives, Beijing has invested heavily in Sri Lanka’s infrastructure and energy sectors. These investments cement China’s role as a dominant creditor and provide a platform for future strategic and economic activities in the region.
Moreover, China’s potential leverage over Sri Lanka's International Monetary Fund negotiations emerged as a critical obstacle, forcing Colombo into a vulnerable position. This dynamic became glaringly apparent during the controversy surrounding the docking of the Yuan Wang 5 vessel.
Analysts noted that China’s refusal to restructure Sri Lanka’s debt significantly delayed the approval of the IMF bailout package. Given that the IMF requires creditor nations to agree on debt sustainability measures before disbursing funds, China’s hesitancy to support restructuring was pivotal in prolonging Sri Lanka's economic crisis. Beijing’s tactics reinforced accusations of “debt-trap diplomacy,” as its infelxibility kept Sri Lanka tied to its financial dependence on China.
Regional dynamics and India’s role
The broader geopolitical ramifications are significant, with Sri Lanka caught in the complex interplay of influence between India, China and the US. India’s proactive engagement has included financial assistance and infrastructure investments, such as the US-supported West Container Terminal project in Colombo, designed to enhance regional economic integration and bolster Sri Lanka’s growth. This partnership underscores India and the US’s intent to counterbalance China’s extensive economic and strategic footprint on the island.
As Sri Lanka navigates the tumultuous waters of international diplomacy, it stands at a crossroads where its decisions today will shape its sovereignty and stability for years to come. Dissanayake’s administration faces a daunting task: finding a path forward that mitigates economic dependence on China while safeguarding its strategic autonomy in a region teeming with geopolitical rivalries.
The natural starting point for Sri Lanka lies in deepening its relationship with India. Colombo’s northern neighbor has proven to be a steadfast ally during the island nation’s most challenging moments, offering critical financial aid and technical assistance.
By fostering stronger bilateral ties, Sri Lanka could unlock new opportunities for collaboration. Joint maritime research, for instance, could serve as a diplomatic counterweight to China’s presence in Sri Lankan waters, reassuring New Delhi of Colombo’s commitment to regional security.
Multilateral engagement
However, Sri Lanka’s path forward cannot solely rest on India’s shoulders. It must embrace the difficult but necessary task of diversifying its economic partnerships. China has dominated Sri Lanka’s infrastructure development for years, leaving the country heavily indebted and diplomatically vulnerable.
Colombo should actively court investments from other regional powers, such as South Korea and the ASEAN countries, to break free of this dependency. Diversifying its sources of investment would reduce the outsized influence any single player may wield over its policies.
At the same time, Sri Lanka recognizes the urgent need for clarity and consistency in its maritime policies. The government’s plan to establish an SOP for foreign vessels is a step in the right direction.
Such a framework may bring much-needed transparency to decision-making, ensuring that all nations—friends or otherwise—are subject to the same rules. This approach would signal to the international community that Sri Lanka is committed to fairness and sovereignty while also addressing security concerns raised by its closest neighbors.
Sri Lanka can enhance its diplomacy by engaging actively with multilateral forums like the Quad and other Indo-Pacific initiatives. These platforms offer Colombo the opportunity to establish itself as a stabilizing force in the region.
Positioned strategically along key maritime routes, Sri Lanka is well-placed to promote maritime security and boost regional trade. Such collaboration allows the nation to balance the competing influences of India and China, steering clear of perceptions of aligning too closely with either power.
The debt challenge
However, the most pressing issue for Sri Lanka is restructuring its overwhelming debt. With China as one of its largest creditors, Colombo faces the delicate task of negotiating debt relief while maintaining Beijing's goodwill. This will require deft diplomacy and a willingness to engage multilaterally, leveraging institutions like the IMF and World Bank to ensure that debt restructuring serves the broader goal of economic recovery rather than merely servicing existing obligations.
Sri Lanka stands at a critical juncture, navigating the complexities of economic dependency and strategic vulnerabilities. Dissanayake’s assurances to India reflect a commitment to regional stability, but actions must follow words.
By adopting a balanced approach that prioritizes transparency, economic diversification and multilateral engagement, Colombo can navigate its dilemmas without succumbing to the pressures of great-power rivalry. However, the road ahead will demand astute diplomacy and resolute policymaking to secure Sri Lanka's sovereignty and long-term stability.
(The author is a Professor at the MMAJ Academy of International Studies, Jamia Millia Islamia, New Delhi. This article was originally published under Creative Commons by 360info)
