2 October, 2022

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The Destiny Of China’s Colony Of Sri Lanka

By Patrick Mendis

Prof. Patrick Mendis

President Gotabaya Rajapaksa of Sri Lanka officially declared on June 22, 2022 that the economy “completely collapsed.” A month earlier, the increasingly debt-laden island nation of 22 million people defaulted on its US$50 billion foreign debt to China and other international creditors, making the entire country completely standstill. The dramatic changes with massive protests in the capital city of Colombo culminated on July 9 with the ransack of the presidential secretariat and the newly appointed Prime Minister Ranil Wickremesinghe’s official residence, followed by setting his private home ablaze at night. President Rajapaksa fled the city and finally promised to resign as the protesters have peacefully been demanding for months.

The so-called “perfect tropical paradise” that is shaped like a teardrop falling from the southern tip of India has indeed now become an island of tears. It is largely caused by the autocratic and corrupt Rajapaksa family who has ruled the strategically located island in the Indian Ocean—except for a brief period from January 2015 to November 2019—for almost two decades. For the past several months, however, the shortage of fuel, gas, electricity, and other subsistence food items and medicines—coupled with the staggering double-digit inflation—has prompted the people to protest peacefully against the government. Despite the heavy police and military presence and imposed island-wide curfew, pro-Rajapaksa mobs still assaulted the protesters “agitating peacefully” outside the president’s office and the prime minister’s residence. Without violence for months, the protesters have continued to demand the resignation of Gotabaya, his eldest brother Prime Minister Mahinda, his youngest brother Finance Minister Basil, and other ministers and family members in the parliament.

After winning the nearly 30-year “civil war” in May 2009, the triumphant Gotabaya—then secretary of the Ministry of Defense and Urban Development under his brother President Mahinda—said, at the third Galle Dialogue on Maritime Security in December 2012, that Hambantota Port is not part of China’s “string of pearls” military strategy to encircle India or to keep the United States away from the Indian Ocean. It is an over one-billion-dollar investment for transshipment of Chinese goods and the resources from the Middle East and Africa. Nonetheless, Gotabaya then clarified that “the Chinese investment in Hambantota Port is a purely economic one.” Indeed, Sri Lanka is the “crown jewel” of China’s multibillion dollar Belt and Road Initiative (BRI) across the Indo-Pacific region, which connects the Hambantota Port, the Colombo Port City (CPC), the Colombo Lotus Tower, and many other gigantic projects. These ports could easily be converted into a dual-purpose military and civilian use, making Sri Lanka an “unsinkable aircraft carrier” for China. During his historic visit to Sri Lanka with two Chinese submarines in September 2014, President Xi Jinping described the island as a “splendid pearl,” while the two countries signed over twenty bilateral agreements in Colombo.

With President Xi’s “New Era” of national rejuvenation, Sri Lanka has now discreetly become a strategic “colony” of battleships with massive projects to advance the Chinese interests against India and the United States in the Indian Ocean. In The Art of War, Chinese General Sun Tzu (544-496) advised that a leader must remember that “to fight and conquer in all your battles is not supreme excellence; supreme excellence consists in breaking the enemy’s resistance without fighting.” Xi, hence, strategically achieves his national goal by peacefully defeating the enemies—India and the United States—before war is even contemplated. Now, the opportunity has presented itself to Beijing, with the collapse of the Sri Lankan economy, to get the upper hand over the United States and India in the Indian Ocean and beyond.

China’s Eyes on the Crown Jewel

For the last phase of the civil war that ended in 2009, China provided the needed “economic support, military equipment, and political cover at the United Nations to block potential sanctions.” The war was mainly a clash between “the Sinhalese-dominated Sri Lankan government and the Liberation Tigers of Tamil Eelam (LTTE) insurgent group,” which “hoped to establish a separate state for the Tamil minority.” During these years of bloodshed and human rights violations on both the government and LTTE sides, the Rajapaksa government was afraid of the powerful lobbying efforts by the Tamil diaspora in the West, encouraging the Western governments to support UN sanctions against Sri Lanka. The Colombo administration had been equally distressed by another “direct Indian intervention”—with the mounting pressure coming from India’s southern state of Tamil Nadu—in the neighboring Sri Lanka’s internal affairs.

Against this backdrop, paying tribute to Chinese patronage at the third Galle Dialogue, Defense Secretary Rajapaksa reaffirmed that “China was an obvious nation to approach” among other traditional donor nations such as Japan, India, South Korea, and the United States. Victorious as war heroes during the decade of 2005-2015, his elder brother Mahinda—then president of Sri Lanka—and his three brothers controlled “many government ministries and around 80 percent of total government spending.” These strongmen also “negotiated directly” with China while considering the island nation as an extended family business enterprise.

Twelve years later, President Gotabaya Rajapaksa—until recently in office since November 2019 with family members still sitting in parliament—has brought the paradise island into an unprecedented socio-economic turmoil with the mismanagement of economic policy and massive corruption by successive governments. Once the leading nation in the UN Human Development Index for life expectancy, literacy rate, and GNP per capita in South Asia, the happy people in the paradise are now entangled in enormous “debt trap” projects with China and loans from Japan and international financial institutions. Such ventures involve the Chinese “white elephant” schemes, including the US$104 million Colombo Lotus Tower for Beijing’s “espionage” operation in South Asia and the US$209 million Mattala Rajapaksa International Airport in Hanbantota—the “emptiest” airport in the world. Moreover, the massive Sooriyawewa Cricket Stadium and the International Conference Hall in Hambantota as well as the nearly US$200 million unused roads and bridges made Rajapaksa’s ancestral home district with golden statues “a throne to the vanity of a political dynasty.” Like other nationalist and narcissistic dictators do, the Rajapaksa clan bloated the bureaucracy and enlarged the military with their associates and supporters while erecting tributes to themselves at the expense and suffering of ordinary citizens.

The Peaceful ‘Aragalaya’

Earlier this year, the autocratic Rajapaksa regime completely bankrupted Sri Lanka, and the country defaulted on “the entirety of its foreign debt amounting to about US$51 billion.” This led to a food shortage with no gas for cooking, long lines waiting for petrol for vehicles, no access to medicines, and diminished electricity supplies. The economic collapse has developed into organic protests (“aragalaya” or struggle) in Colombo and elsewhere in the country. Violence erupted when the Rajapaksa allies attacked the peaceful protesters who demanded the embattled President Gotabaya’s resignation, chanting “Gota Go home” for several months. His elder brother Mahinda—the prime minister who had previously been the president—was forced out from power in May and his other brother Basil—the finance minister—resigned from the cabinet in June 2022. Gotabaya himself has now surrendered to the power of people, leaving the island nation into an uncharted territory in governance and foreign relations.

The complete removal of the pro-Chinese Rajapaksa family presents an existential threat to China’s interests in Sri Lanka—especially when President Gotabaya appointed five-time Prime Minister Ranil Wickremasinghe back to the post for just two months, replacing the president’s brother Mahinda. The unpopular but veteran prime minister and his United National Party has only one seat out of 225 in the parliament. At the same time, however, pro-American Wickremesinghe had been viewed by protesters as a strange bedfellow in the name of political expediency and as a crisis manager for Gotabaya, who wanted to remain in the powerful presidency to protect their financial interests and political ambitions.

The new prime minister promised the nation that he would resolve the current shortage of oil, gas, electricity, medicine, and other subsistence imports necessary for daily survival. Wickremesinghe also vowed to negotiate with the International Monetary Fund (IMF), the World Bank, and other lenders. It was a matter of concern for China because the transparency required by these institutions would expose the nature of Chinese loans and bribe schemes, the exorbitant interest rates and kickbacks, and the secret negotiations conducted by the members of the Rajapaksa family and their associates. After learning that the “20 percent” kickback “monies were paid as commissions” to the Rajapaksa family and associates, the Aragalaya protesters have increasingly been convinced that they could not remain silent until there is a better governance to alleviate their suffering from the destitute situation.

The Chinese Paradox and Autocratic Regimes

Amid all this, Chinese State Councilor and Foreign Minister Wang Yi arrived in Sri Lanka in January 2022 at the request of the Rajapaksa government to restructure debt payments and to alleviate the financial troubles and economic hardships of the island that have developed since the start of the Covid-19 pandemic. During the visit, the Chinese Foreign Ministry announced that Western media was “unfairly hyping [the] debt issue,” adding that “calling the cooperation projects between China and Sri Lanka ‘white elephants’ is completely untrue” as “bilateral cooperation is welcomed by local people.”

It is true that debt owed to China now accounts for only 10 percent of Sri Lanka’s total US$35 billion foreign debt, similar to Japan, making China only the fourth-largest lender, preceded by the international financial markets, the Asian Development Bank, and Japan. Unlike the other lenders, however, China’s motivation is simply driven by its communist statecraft and geopolitical calculus in the Indian Ocean region. When Sri Lanka failed to repay Chinese debt stemming from the Hambantota Port, for example, the Colombo government agreed to a debt-for-equity swap and gave Beijing a 99-year lease of the port with the 15,000 acres neighboring the wildlife sanctuary.

Moreover, the nearby Mattala Rajapaksa International Airport was built with the possible intention of a dual civil-and-military installation for future use. With China’s first military base at Djibouti in the Horn of Africa and the latest Ream naval base in Cambodia, Beijing may aim to use the world’s emptiest international airport in Sri Lanka to develop its emerging Indian Ocean military theater against the United States, its allies, and India. All these projects were initially promoted within the BRI as development assistance. In fact, the BRI has been the ambitious foreign policy strategy of China to bring developing countries under its realm of influence as shown in the “cautionary tale” of Sri Lanka.

American Interests over the Paradise Island

When China refused to extend additional credits for oil import to the failed state, President Gotabaya Rajapaksa called on President Vladimir Putin of Russia for assistance for oil shipments in July. Understanding the desperate measures taken by Gotabaya, US Ambassador to Sri Lanka Julie Chung reminded that Sri Lanka must consider “our sanctions globally on Russian banks, logistics, transportation, and financing;” however, she assured that “the US does not have sanctions against third world countries on import of oil.”

To remove misinformation that the United States and the international community are holding back support at the time of need, Ambassador Chung announced that President Joe Biden has granted US$20 million in “humanitarian assistance including for the most vulnerable segments of society,” the poorest of the poor. In addition, the US Development Finance Corporation committed US$150 million for private sector led initiatives and US$80 million for renewable energy as well as recent commitment to technical support for the Sri Lankan Treasury.

Misinformation on US involvement in Sri Lanka was widespread during the brief but tumultuous administration of President Maithripala Sirisena (2015-19); nevertheless, the anti-American sentiments have continued. When the visiting US Deputy Assistant Secretary Alice Wells, for example, referred to Sri Lanka as an important piece of “real estate” for its strategic location in the major maritime shipping routes, it was perceived negatively as the real estate owner-turned President Donald Trump’s vision of transactional, purely American-centric diplomacy. The pro-western Sirisena administration, however, favored striking deals with the Trump administration, especially when Sri Lanka renewed its Acquisition and Cross-Servicing Agreement (ACSA) with the United States for another ten years. The ACSA allowed the transfer and exchange of logistical supplies and refueling services for US military operations in the Indian Ocean rim region.

The pro-China Gotabaya Rajapaksa administration had refused to cooperate with American initiatives, demonstrating that Sri Lanka has now actively decided to partner with Beijing instead of Washington. In fact, the United States failed to renew its Status of Forces Agreement (SOFA) with Sri Lanka, even after pledging $480 million in development aid via the Millennium Challenge Compact (MCC). Both countries spent months debating about the MCC compact that promised infrastructure development projects, similar to China’s BRI projects in Sri Lanka. At the end, Gotabaya declined to sign the MCC offer and refused to renew the SOFA, speculating that the United States intended to establish a military base to counter the Chinese influence in South Asia and the Indian Ocean rim countries.

The Sino-American Endgame for Sri Lanka

With the removal of pro-Western Prime Minister Wickremesinghe and pro-Chinese President Rajapaksa by protesters, it might now be highly probable that the proposed credit aid conference led by China, India, Japan, and most importantly the United States will guide Sri Lanka. The immediate goal is to stabilize the collapsed economy and alleviate the human suffering while helping the island recover from foreign debts. As China has relatively been muted during the Aragalaya, US Ambassador Chung seized the opportunity to encourage peaceful protests, restrain the military response, and protect the freedom of speech and Internet communication.

Indeed, it is morally imperative for all lenders—including the Asian Development Bank and the IMF—to jointly help the paradise-island nation. For China, as Sun Tzu counseled, President Xi would most likely build for his Indian and US opponents a “golden bridge” to retreat across; otherwise, the opponent “will engage in battle and fight like a caged and cornered tiger,” when economic incentives run out for India and the United States. Both democracies need to realize the importance of economic development of the island over their own military interests in geopolitical endgame against China.

Thus, the tragic saga of the teardrop island might remain as China tries to use its economic power to advance Beijing’s ultimate goal: to be the comprehensive global power in the Indian Ocean and beyond. Given the latest events in Colombo, however, it appears that the paradise island may not completely be turned into a Chinese colony as long as the Sri Lankan people are awakened and determined to choose their own destiny as a free nation.

*Dr. Patrick Mendis, a former American diplomat and a military professor in the NATO and Indo-Pacific Commands of the US Department of Defense, is a distinguished visiting professor of transatlantic relations at the University of Warsaw in Poland as well as a distinguished visiting professor of global affairs at the National Chengchi University in Taiwan. A non-resident senior fellow of the Synergia Foundation in Bangalore, India and the Taiwan Center for Security Studies in Taipei, Prof. Mendis served as a distinguished visiting professor of Sino-American relations at the Yenching Academy of Peking University in Beijing. He is a former commissioner to UNESCO and the secretariat director of the Bureau of Educational and Cultural Affairs in the US Department of State. The views expressed in this analysis do not represent the official positions of his current or past affiliations nor governments.

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Latest comments

  • 5
    4

    Kindly read something outside the US State Department notes rehashed by the media hacks.
    TRY
    https://www.theatlantic.com/international/archive/2021/02/china-debt-trap-diplomacy/617953/
    OR
    https://thediplomat.com/2019/05/is-sri-lanka-really-a-victim-of-chinas-debt-trap/
    OR
    https://www.chathamhouse.org/2020/08/debunking-myth-debt-trap-diplomacy
    OR
    https://mronline.org/2022/07/13/real-debt-trap/
    The last one names as top holders of the Sri Lankan government’s debt, in the form of international sovereign bonds (ISBs) as:
    BlackRock (U.S.)
    Ashmore Group (Britain)
    Allianz (Germany)
    UBS (Switzerland)
    HSBC (Britain)
    JPMorgan Chase (U.S.)
    Prudential (U.S.)

  • 2
    2

    ” The last one names as top holders of the Sri Lankan government’s debt, in the form of international sovereign bonds (ISBs) as:

    BlackRock (U.S.)

    Ashmore Group (Britain)

    Allianz (Germany)

    UBS (Switzerland)

    HSBC (Britain)

    JPMorgan Chase (U.S.)

    Prudential (U.S.)”

    Did you read the essay in full before you started your “Siri Ma O, Rowdy Mahinda, Gothaapyal’s ” Promotion campaign? Or is that you cannot understand that what is the difference between Capital Economy and Communist Stalin Economy? The essay talks clearly about the Chinese loans and other private funded ISB taken from other countries, and ADB like loans. Can you tell, like in Hangbangtota loan, what are the real estate properties fledged for the ISBs? $540 M Millenium Challenge fund money was only a gift, no obligation. But if Langkang had abused that money, then it would turn into a loan. Do you know a country named Singapore and do you know to write that name with proper spelling? Just don’t be a Savam who can understand nothing!

    • 1
      1

      Mallai you are absolutely right. Only those, who are naive or stupid , consider investments of global financial institutions in ISB or debt funds, as loans. To diversify/ balance funds, financial institutions usually allocate a small percentage of portfolio in risky funds, anticipating higher returns. Many have already lost money on Lankan debt funds. To consider investments of financial institutes as loans, is utter stupidity. If Lanka goes bankrupt Investors lose their money, whereas Loans are not written off. Any further explanation may complicate the empty minds.

  • 4
    2

    The article is a repetition of Sri Lankan history that’s known to everyone. The professor isn’t aware that 81% of Sri Lanka’s external debt is owed to US and European financial institutions and Western allies Japan and India. China owns just 10%. But Washington blames imaginary “Chinese debt traps” for the nation’s crisis, as it considers a 17th IMF structural adjustment program. The professor needs to do a bit of real reading.

    • 2
      2

      “The article is a repetition of Sri Lankan history that’s known to everyone”
      Sarath, there is more mischief than repetition.

  • 1
    0

    Thanks, Patrick, for your sustained piece of invective against the Rajapaksas.
    .
    Yes, this part of Lanka where I once met you is as close to paradise as you will find anywhere on Planet Earth.
    .
    I don’t want to delve into the politics of America, since your condemnation of the Rajapaksas has been so thoroughgoing!
    .
    Panini Edirisinhe of Bandarawela

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