The crippling economic crisis in Colombo has forced Rajapakse to turn to Delhi for help and speed up the long-pending deal of joint development of the Trincomalee oil tank farm
The Chinese Foreign Minister will visit Sri Lanka next week after the announcement of the expatriation of the signing process of the Trincomalee oil tank farm deal between the island nation and India.
The crippling economic crisis in Colombo has forced Rajapakse to turn to Delhi for help and speed up the long-pending deal of joint development of an oil tank farm in the north-eastern province of Trincomalee.
According to the interview of Sri Lankan energy minister Udaya Gammanpila to The Hindu, New Delhi And Colombo are close to the finalization of the terms of the project after negotiating for 16 months.
The deal dates back to 1987
India is interested in the oil tank farm since 1987. The India-Sri Lanka Accord 1987 mentioned that the refurbishing work of the tank farm located in the north-eastern province, Trincomalee will be done jointly by India and Sri Lanka.
The agreement could not see the light as both countries became busy fighting the war against Tamil Tigers. In 2003, an attempt was made to operationalise the agreement, but it didn’t work. In 2017, both parties had agreed to fasten the process, but the opposition from trade unions of the Ceylon Petroleum Corporation (CPC) halted the progress.
To close the deal fast, Udaya Gammanpila has asked the CPC chairman to expedite the process of forming a new oil tank management subsidiary by the name of Trinco Petroleum Terminal, the Lankan weekly, The Sunday Times reported. The JV proposed a 51% stake for the CPC and 49% for the Indian Oil Corporation (IOC).
Chinese FM Wang Yi’s visit to Colombo
China’s Foreign Minister, Wang Yi is expected to visit Sri Lanka for two days on January 7. His visit is expected to be against the backdrop of a financial spat between the two nations over a container of organic fertiliser that was cancelled by Lanka. The spat quickly escalated to unexpected tension between both the countries.
Lanka cancelled an import order of 99,000 tons of organic fertiliser. After this cancellation, China had blacklisted Lanka’s state-run People’s Bank and accused it of a vicious default on the letter of credit payment. In early December, a Chinese company launched an arbitration procedure for an indemnity of $8 million. Sri Lanka managed to calm down the fire by agreeing to pay $6.4 million. Wang Yi’s visit is therefore important to offer sweeteners to the Rajapaksa government to recover the lost goodwill. Adding to the Chinese worries is Delhi offering non-scripted financial assistance to the island nation.
Apart from signing the three-year ‘standby’ swap agreement with Beijing in March 2021, Sri Lanka has also asked Delhi for help. India offered a ‘four-pronged package’ to the Sri Lankan Finance Minister Basil Rajapaksa during his Delhi visit in November. The package offered – a LOC for fuel imports only from India; early finalization of the joint India-Sri Lank development plan for the Trincomalee oil tank farm. It also offered a currency swap to help Lanka pay its foreign debt and facilitation of Indian investments in different sectors.
Sri Lanka’s FOREX reserves tank to $1.6 billion at the end of November, leading to a drop in food imports and pushing up prices of essentials in the country. An international rating agency Fitch downgraded Sri Lanka from CC to CCC and issued a warning. It warned that the island country might default on two international sovereign bonds in 2022.