On Saturday, the Indian Ministry of External Affairs announced that India and the United Arab Emirates (UAE) have agreed to jointly build an energy center in Sri Lanka to strengthen strategic cooperation with Colombo and counter China’s penetration in the Indian Ocean.
According to Reuters, the agreement was signed during Indian Prime Minister Narendra Modi’s visit to Sri Lanka, which also marked the first time Sri Lanka’s newly elected President Anura Kumara Dissanayake received a global leader since taking office in September last year.
Dissanayake welcomed Modi on the red carpet with a welcome ceremony and awarded him Sri Lanka’s highest civilian honor to acknowledge the “deep personal friendship” he exhibited towards the country.
Since Sri Lanka faced a debt crisis in 2022, India provided approximately $4 billion in aid to help the country overcome the crisis, leading to a deepening of the relationship between the two countries.
The agreement signed on Saturday highlights the escalating competition between India and China for dominance in Sri Lanka. China’s Sinopec has already signed agreements with Sri Lanka to construct a $3.2 billion oil refinery in the southern port city of Hambantota.
The energy hub to be jointly developed by India, UAE, and Sri Lanka will be located at the strategic eastern port of Trincomalee, involving the construction of a multi-purpose oil pipeline and possibly utilizing an oil tank farm from the World War II era, partly owned by a local subsidiary of Indian Oil Corp.
A source had informed Reuters at the end of 2022 that with ongoing friction between India and China along the Himalayan border, regional security would remain a priority for India. Leveraging the advantage of Sri Lanka’s northern proximity to India, these projects could help India counterbalance China’s extensive infrastructure projects established in the southern region of Sri Lanka over the past 15 years.
Indian Foreign Secretary Vikram Misri stated that the UAE is India’s strategic energy partner and an ideal candidate for such cooperation in the region. He mentioned that the three countries would select companies to assess the feasibility of the projects, with the UAE’s specific involvement to be further clarified during business negotiations.
During the visit, Modi also inaugurated a $100 million solar power project jointly constructed by India and Sri Lanka. Additionally, the two sides completed debt restructuring. According to data from the Sri Lankan Ministry of Finance, the country owes around $1.36 billion to the Export-Import Bank of India and the State Bank of India. Since defaulting on its debt in May 2022, Sri Lanka has reached preliminary agreements with major creditor countries like India, Japan, and Beijing.
India and Sri Lanka also signed several cooperation agreements covering areas such as interconnected power grids, digitalization, security, and healthcare.