White elephant mission

What may an oil refinery in Hambantota imply for Sri Lanka first, and China, subsequent? One can safely assume that from a purely Sri Lankan perspective, it may nicely be a white elephant mission like many others, together with the Hambantota Port and SEZ, expressways initiatives and the much-hyped Colombo Port City (CPC), whose progress has been gradual because the collapse of the Sri Lankan economic system final 12 months. The phrase ‘white elephant’ might not be apt to some, because the refinery mission doesn’t contain any debt quotient, as is thought at current.

Though the explanations should not far to hunt, one would wish to attend and watch till the main points of the Sinopec settlement are made recognized in public – if in any respect. It stays to be seen if the settlement gives for revenue-sharing in some kind, or accumulation of duties and taxes for the Sri Lankan exchequer. That is to say, there shall be no obligation concessions bordering on complete write-off.

Then, there may be the necessity to discover out if the Sinopec mission will present jobs to Sri Lankans, and thus increase household incomes. Considering that the proposed refinery is ready to come back up in Hambantota, the place Beijing could not need non-Chinese ‘peeping around’, the possibility of jobs for the locals could not even be into account. However, particulars should be recognized right here too, as within the prestigious CPC mission, the settlement has offered for a majority of jobs, throughout all ranges, to the locals.

This aside, CPC has had its share of controversies via the previous few years. The newest one concerned former British prime minister David Cameron after he signed in on an advisory function of some sort and presence in a CPC roadshow within the Gulf some months again. His return to lively politics and public administration as the brand new international secretary of British Prime Minister Rishi Sunak has already prompted eyebrows to rise in a number of capitals, beginning with London.

As an apart, aside from the CPC and China angle, there are the ‘Sri Lanka war crimes probe and accountability issues’. Here, the UK has been a powerful proponent for bringing the culprits to guide on the UNHRC, together with the US all alongside. At occasions, the UK additionally stood in for the US, so to say, after Washington beneath president Donald Trump had boycotted the UNHRC in between.

Unhealthy competitors

Like the Hambantota port mission, the concept of a refinery doesn’t make nice financial sense with the Sri Lankan market alone in thoughts. Already, public sector Ceylon Petroleum Corporation (CPC) and its refineries, and likewise India-backed Lanka IOC are serving the Sri Lankan market. Sinopec entered the market earlier this 12 months as a retailer. An American agency, RK Parker, is because of enter the retail market quickly, to market Shell merchandise.

Unless the Colombo dispensation visualises a scenario the place unhealthy competitors among the many current gamers and new ones getting into the sector results in their promoting oil merchandise for a track to Sri Lankan customers, each people and industries (or, no matter is there), it doesn’t make political or financial sense for all of them to be within the discipline – or, keep right here for lengthy. In the top, one or lots of them would possibly find yourself winding up their operations within the nation.

There is a catch, particularly for Lanka IOC and India. Under IMF conditionalities, Sri Lanka is ready to privatise many, if not all ‘state-owned enterprises’ (SoE), in any other case generally known as ‘public sector units’ (PSU). If the axe falls on the CPC, even when it isn’t full-fledged privatisation, whoever picks up the stakes on provide could wish to have a say on Lanka IOC operations.

From an Indian standpoint, it may have bigger penalties than is seen on the retail entrance. During President Ranil Wickremesinghe’s New Delhi go to earlier this 12 months, the 2 sides signed an MoU for India to assist guarantee ‘energy security’ for Sri Lanka, by reviving discussions for an unlimited enhance in storage of imported merchandise within the two oil tank farms within the japanese port city of Trincomalee.

In October 2021, throughout the Sri Lanka go to of then international secretary Harsh Vardhan Shringla, India additionally signed MoUs for establishing non-conventional power installations within the nation. Though IOC could or might not be concerned, the 2 nations are additionally engaged on a pipeline mission for the provision and storage of oil and oil merchandise from India for storage within the Trinco tank farms of the Second World War classic.

Panic response

On the face of it, Sri Lanka invited many international corporations to drift retail enterprise in petroleum merchandise within the nation, and now for Sinopec to arrange a refinery appears to be a panic response to the unprecedented gasoline scarcity that accompanied the financial disaster final 12 months. Policymakers in Colombo as a substitute must acknowledge that the disaster was prompted not by scarcity or storage issues, however owing to the federal government’s incapability to earn and pay in {dollars}, for all imported items.

Along with gasoline, meals and medicines additionally confronted large shortages within the home marketplace for days and weeks. India persistently, and as soon as even war-borne Russia (in opposition to Ukraine), helped out with limitless provides simply as New Delhi was extending new greenback credit score and restructuring current compensation schedules, and so on. The query thus arises if letting in additional retailers and even refiners may assist sooner or later if a scenario like final 12 months had been to emerge sooner or later, even when theoretically. The reply is a agency ‘No’.

Incidentally, if there is no such thing as a home or worldwide marketplace for Sinopec’s refined merchandise from Hambantota, what are the choices accessible to China? According to some studies, it might have used for China’s bunkering mission at Hambantota, however then that itself has not taken off within the few years of its full-fledged existence. China has the best variety of ocean liners in enterprise and except all of them ship their ocean-going vessels for bunkering in Hambantota, with out getting it performed again house, there may be going to be little or no enterprise within the Sri Lankan finish.

China would nonetheless assume that western liners could not wish to do it in Hambantota, each owing to political causes and luxury zones that they’ve established with different bunkering operators elsewhere in these elements. Anyway, Hambantota is method off the Indian Ocean Sea Lines of Communication (SLOC) for long-distance tanker liners to take an inward deviation for bunkering work. It is in contrast to container vessels visiting Colombo Port, because the latter nonetheless caters to India. According to official estimates, 70 per cent of the Colombo Port’s enterprise pertains to India.

Playing Paul in opposition to Peter

What does all of it imply by way of India’s safety issues? With a refinery in place in Hambantota, a simple goal for an enemy fighter plane, China might not be tempted to arrange a navy base of any consequence in these elements. A bigger base with air defence programs, which might be there anyway, alone is sensible. Yet, China would (should) be equally conscious that in Hambantota or thereabouts, it will be trapped in an Indian Ocean pond in these elements, militarily managed by adversaries and non-friends, like India (mainland and the Andamans base), Diego Garcia and French Reunion Island.

After his latest China go to, the place he met his counterpart Xi Jinping and confabulations with visiting particular envoy and State Councillor Shen Yiqin, Wickremesinghe reiterated the Sri Lankan State’s continued dedication to ‘One China Policy’, although the quick want and urgency for such reiteration is just not recognized. For her half, Shen Yiqin outlined Beijing’s need to increase the China-Myanmar BRI to incorporate Sri Lanka and likewise take ahead bilateral discussions on a long-pending FDI.

With Shen Yiqin, President Wickremesinghe talked about bringing in additional investments to the nation however after guaranteeing that there was no safety menace to neighbouring India. In this context, he ‘clarified’ to an Indian interviewer that no Chinese spy ships had been in Sri Lankan waters. What they’ve had had been two analysis vessels and periodic visits by PLA-N navy ships. According to the Sri Lankan official assertion on the assembly with Shen Yiqin, the host additionally reiterated the nation’s dedication to holding the neighbourhood Indian Ocean as a peaceable area and supporting good order within the seas.

It is a place taken by the US and different western nations, going past the Quad and Indo-Pacific with Indian participation. New Delhi has subscribed to the identical views. It thus stays to be seen what had provoked Wickremesinghe to reiterate his nation’s place on a delicate difficulty, in his talks with the customer, particularly when he was imagined to have thrashed all of it out with President Xi in Beijing solely weeks earlier.

That Wickremesinghe was in New Delhi after which the US earlier than visiting Xi in Beijing needs to be a message in itself. However, Colombo can be silly to assume that it may possibly proceed to play world Peter in opposition to regional Paul, or run with the hare and hunt with the hare, and nonetheless keep protected and safe, over the medium and lengthy phrases – which is what a nation’s historical past is all about and what that historical past too dictates!

The author is a Chennai-based coverage analyst and political commentator. Views expressed within the above piece are private and solely that of the creator. They don’t essentially replicate Firstpost’s views.

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