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Sri Lanka’s Indo-phobia and Gammanpila’s U-turn - A closer look at the Trinco oil deal

India’s Foreign Secretary Harsh Vardhan Shringla visits the Trincomalee oil tanks in October 2021.

The Sri Lankan government has signed a long-awaited agreement with India that will allow New Delhi to restore at least 75 oil tanks in the eastern city of Trincomalee this week.

The announcement of the deal, which has faced decades of negotiations amidst opposition from Sinhala nationalists, was made by Sri Lanka’s energy minister Udaya Gammanpila this week.

Gammanpila, himself a staunch Sinhala nationalist and leader of the extremist Pivithuru Hela Urumaya party, “claimed that 85 of 99 tanks will be under Sri Lankan control which were under Indian control”.

A closer look at the deal, however, reveals a slightly different picture.


Sri Lanka’s Indo-phobia

Cartoon published in The Island in 2010

The Trincomalee Oil Tank is located in the heart of the Tamil North-East. The facility, which was once bombed by the Japanese during World War II, contains 99 oil storage tanks. Though the 1987 Indo-Lanka Accord called for joint development of the oil tanks, like many other parts of the agreement – such as devolution of land and police powers to a merged North-East province – it laid stagnant.

In 2003, under the newly formed Lanka Indian Oil Corporation (LIOC), a subsidiary of Indian Oil Corporation (IOC), it was initially agreed that India would be granted a 35-year lease at an annual rental of US$100,000. The deal was never fully implemented however as Sinhala opposition to an Indian presence on the island grew stronger with the rise of soon-to-be president and hardliner Mahinda Rajapaksa.

This was not a newfound fear of India. Indeed, the hostility towards New Delhi reflected deeper rooted ‘Indo-phobic’ sentiments that has attempted to block Indian commercial access to the island.

Read more: Bilateral relations?

For example, in recent decades successive Sri Lankan governments have resisted Indian attempts to finalise the Comprehensive Economic Partnership Agreement (CEPA), a deal that would open up possibilities for greater trade and investment between the two countries.

Bilateral discussions on CEPA stalled after protests by Sinhalese professionals and business groups opposing the agreement as a threat to Sri Lankan ‘sovereignty’. Protestors held placards denouncing CEPA as threatening “2,500 years of Sri Lankan Independence”.

Protestors holding placards during a demonstration against CEPA in 2010 (File Photo)

Read more: Sri Lanka’s Indophobia

India did however manage to operate 14 tanks under the agreement despite the backlash. But the anti-Indian sentiment amongst the Sinhala south continued, including throughout 2021 when the Sri Lankan cabinet decided to award a deal to a state-owned Chinese company for the second phase of the East Container Terminal (ECT) – a project that Delhi has been keen on for several years.

The withdrawal came amidst intense pressure from Sinhala nationalist groups and Buddhist monks, who have long voiced their objection to any “foreign involvement” in the project.

"We heard that there is a lot of pressure from India over this project,” Shyamal Sumanarathna, secretary of the Ports, Commerce Industries and Progressive Workers Union told the Nikkei Asian Review. “But we are not a province of India, we are a sovereign nation and we do not need to dance to their tunes.”


Gammanpila’s U-turn

Also in 2021, Sri Lanka initially said that it had reportedly scrapped the 2003 oil tank deal entirely.

"I am proud to announce that the oil tanks the use of which had been denied to us since 2003 will be soon ours," claimed Gammanpila.

Read more: Sri Lanka scraps another deal with India

That was not to be the case for long.

In October, India’s Foreign Secretary Harsh Vardhan Shringla visited the site, even as Sinhala nationalists continued to demand Delhi be excluded from projects in the region.

And last month, Sri Lanka’s finance minister Basil Rajapaksa reportedly penned a four-point economic plan with New Delhi, as Sri Lanka sought crucial financial support from India amidst a deepening economic crisis and growing tensions between the neighbours, which stipulates the “early modernization of Trincomalee Tank Farm”.

This week, Gammanpila announced that India would indeed be involved in the restoration project, which will cost approximately US$1 million per tank, declaring it a “historic victory”.  “What no government could do in 19 years has been achieved now,” Gammanpila reportedly said with satisfaction.

He tweeted that “85 of 99 tanks will be under Sri Lankan control”.

The details however reveal that the LIOC will be given 14 entire tanks on a 50-year lease.

It will also retain a 49% stake in 61 other tanks that will be held jointly with Sri Lanka’s Ceylon Petroleum Corporation (CPC).

Only the remaining 24 tanks will be entirely under Colombo’s control.


Economic crisis grows

Gammanpila’s comments to reporters reveal why he may have had the change of heart.

"We hope to receive Cabinet approval on Monday and once it is given, we will sign the agreement," he told journalists. "Most probably the credit line will be signed in the next 3-4 weeks.”

The credit line he was referring to is a US$500 million-dollar request from Sri Lanka, that the island desperately needs. With rising inflation, soaring food prices sending malnutrition warnings, populations plunging below the poverty line and rising international debt repayments, Colombo is facing an enormous economic crisis.

“Covid crisis leaves Sri Lanka on brink of bankruptcy,” read a Guardian headline last week.

With a bond repayment of US$500 million due later this month, Sri Lanka is desperate. And according to Reuters, the credit line from India is not the only assistance Colombo is seeking with two sources at the Finance Ministry confirming that they are also “negotiating an additional $1 billion credit line from India”.

As the financial crisis rumbles on, and despite Sri Lanka’s requests for support, New Delhi has been stoic in its response.

At least two requests are known to have been made for economic assistance from New Delhi - a debt freeze request directly by Sri Lanka’s prime minister Mahinda Rajapaksa in February 2020 and a US$ 1.1 billion currency swap request from Sri Lanka president Gotabaya sought in May 2020.

“New Delhi is yet to respond to either, amid considerable strain,” said The Hindu last year.

Basil Rajapaksa meets India's Union Minister for Housing & Urban Affairs & Minister for Petroleum and Natural Gas, Hardeep Singh Puri.

Indeed, when asked about the credit lines this week, Shri Arindam Bagchi, Official Spokesperson at India’s Ministry of External Affairs, did not elaborate.

“You would recall that Sri Lankan Finance Minister, His Excellency Mr. Basil Rajapaksa visited New Delhi last month,” he told reporters.

“He briefed the Indian side on the economic situation in his country and his government's approach in addressing these challenges. India has always stood by the Sri Lankan people and the Sri Lanka is an important part of our neighbourhood first policy. Discussions during the visit took place on deepening cooperation in areas of food and health security, energy security, balance of payment issues, and Indian investments in Sri Lanka, among others. I understand that further consultations are ongoing.”

Whilst the Sri Lankan regime remains waiting in hope, in the Sinhala south opposition has not ceased.

In Sri Lanka’s Supreme Court this week, shortly after the oil tank deal was announced, the Secretary of the National Bhikkhu Front, Wakmulle Uditha, lodged a fundamental rights petition opposing the deal.

"We would like to tell Sri Lankans that there is no reason for us to accept or respect this agreement,” Education Secretary of the Frontline Socialist Party (FSP), Pubudu Jayagoda also told reporters this week, claiming the new deal was "not legitimate". 

“These strategically important agreements that have significant impact on our lives are not even presented to the Cabinet, let alone the people," he continued. These agreements are against our constitution and the law".

The anti-Indian sentiment clearly remains.

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