This article includes the writer’s answers to questions from a Sri Lankan research scholar on big-power strategic competition in the Indo-Pacific theatre with special focus on Sri Lanka
Strategic churn-up in Indo-Pacific
How do you assess the strategic competition between China, India, and the US in the Indo-Pacific, especially around Sri Lanka? Can Sri Lanka play an active role in the Indo-Pacific by balancing major powers?
While examining the strategic competition between China, India, and the US, with focus on Sri Lanka in the Indo-Pacific region, we need to remember the island State’s unique geostrategic location. Sri Lanka dominates the sea lanes of communication, mid-way.
Sri Lanka, in combination with the choke points of the Bay of Bengal, Malacca Strait, and the Lombok and Sunda Straits, can bring maritime traffic in the Indo-Pacific to a halt. Realising this, the US, European Union (EU), and their Western allies, as well as China and Japan, have invested in maintaining good relations with Sri Lanka.
China has emerged as the most powerful naval power in the Indo-Pacific region. The country had been claiming almost the whole of the South China Sea intruding into the Exclusive Economic Zones (EEZ) of neighbouring countries like Vietnam, the Philippines, Indonesia, etc.
This has been a cause of concern, not only for China’s neighbours but also for the major users of the Indo-Pacific seas. The four-nation Quad framework of Australia, India, Japan, and the US represents part of their efforts to keep the supply chains of the Indo-Pacific open.
Ever since President Xi Jinping came to power in 2013, Sri Lanka and India’s western neighbour Pakistan have become important destinations for China’s Belt and Road Initiative (BRI) and the 21st Century Maritime Silk Route (MSR). China has tried to cultivate its relations with Pakistan and Sri Lanka. Sri Lanka’s strategic importance for China’s Indo-Pacific security has increased as US-China relations have become significantly more confrontational and competitive under US President Donald Trump.
The US under Trump saw a departure from decades of engagement-focused US policy, replaced by a more assertive and often unilateral approach aimed at pressuring China on trade, technology, and geopolitical influence. While some high-level talks have continued and areas of potential cooperation are still being explored (as evidenced by recent meetings of the US Secretary of State), the underlying dynamic has shifted towards a deeper, more durable superpower rivalry.
This has led to increased uncertainty and turbulence in the relationship, with implications for global trade, security, and diplomatic efforts. It is going to be increasingly difficult for a small country like Sri Lanka to manoeuvre in the turbulent environment building up in the Indo-Pacific region.
How does the India and US strategic cooperation with regard to the Indian Ocean affect Sri Lanka, directly or indirectly? Do you think this cooperation helps create balance in the region or does it increase pressure on smaller countries like Sri Lanka?
President Trump has disturbed the balanced relationship the US had tried to achieve in the country’s foreign policy as a whole. His involvement in support of Israel in its wars in Gaza and against Iran has sent shockwaves in the carefully crafted US relations with the Arab world. As a result, in South Asia the US-Pakistan relations are being reset.
We can see the beginnings of Cold War 2.0 waged by the US under Trump and its North Atlantic Treaty Organization (NATO) allies against Russia, China, and North Korea. Trump has weaponised US tariff rates to reassert and ostensibly strengthen the US Dollar.
Both the US President and NATO have sent clear signals that they will not allow the BRICS alliance (with Brazil, Russia, India, China, and South Africa as founders) to gain the leadership of the Global South.
In this strategic churn-up, India is in the process of readjusting its political and strategic priorities. This is best illustrated by Operation Sindoor, carried out by India against Pakistan in May in response to Pakistan-inspired terrorist attack on civilian tourists in Pahalgam in Jammu and Kashmir.
India’s military response has demonstrated a high degree of military precision and coordination across its armed forces, striking targets linked to Pakistan-based terrorist groups without crossing the border. India has demonstrated against terrorist locations of Lashkar-e-Taiba (LeT) and Jaish-e-Mohammed (JeM) deep inside Pakistan, if and when necessary. It showed a shift in India’s counter-terrorism doctrine towards more calibrated offensive action.
Operation Sindoor also involved diplomatic and strategic messaging to the international community. India has demonstrated that Pakistan must be held accountable for terrorist acts in India by carrying out a temporary suspension of the Indus Waters Treaty, the closure of the Attari-Wagah border, and suspension of bilateral trade with Pakistan.
On the other hand, India was probably disappointed when the US adopted a ‘neutral stance,’ rather than offering unequivocal support for India against terrorism. In a belated action, the US has proscribed The Resistance Front, responsible for the terrorist attack in Pahalgam. At the same time, Trump and his Government are sending signals that the US is sliding back to parity of treatment between India and Pakistan.
India’s newfound assertive stance can cause some concern to its smaller neighbours like the Maldives and Sri Lanka. We can expect India to take measures to reassure them through infrastructure and energy links, as well as by promoting joint economic activity.
These developments indicate that the Indo-Pacific region is heading for turbulence amidst a churn-up in the wake of the US President’s tariff war against China, Japan, South Korea, and India. Coupled with this, the US and EU have hyped a sanctions regime against Russia, as a part of the Ukraine war.
These developments are likely to affect South Asian countries that are dependent on cheaper energy resources and tourism from Russia. Sri Lanka’s tea exports and readymade garment industry are also likely to be affected. We can expect China to pressurise Sri Lanka to finalise the Free Trade Agreement as well make existing Chinese infrastructure projects like Port City Colombo, the Matala Airport, and the Hambantota Port profitable.
How do you see the current partnership between India and Sri Lanka under the broader Indo-Pacific strategy?
Sri Lanka is separated from peninsular India by only about 40 km of sea. This makes Sri Lanka the vanguard of India’s maritime security in the Indian Ocean Region (IOR).
As a corollary, Sri Lanka’s security is physically linked to India’s security. This makes it imperative for both countries to maintain good relations. There are both positives and negatives in their shared history, with ethnicity, culture, and languages impacting their relations.
Both countries have been conscious of this; India under Prime Minister Narendra Modi has taken measures to scale down its ‘big brother’ attitude towards Sri Lanka, which affected relations in the past. India’s unconditional economic help when Sri Lanka went bankrupt in 2022 is a good example of the state of win-win relations existing at present.
The Marxist Janatha Vimukthi Peramuna (JVP) had in the past demonstrated anti-Indian and pro-Chinese attitudes. However, the JVP-led National People’s Power (NPP) Government, now in power under President Anura Kumara Dissanayake (AKD), has shown pragmatism in its approach when handling foreign policy and economic recovery.
Minister of Agriculture K.D. Lalkantha, speaking in Parliament during a Budget session, explained it as part of the NPP’s economic philosophy. He called it “arthika prajathanthrawadaya” (economic democracy).
Why does India view China’s growing influence in Sri Lanka as a threat? In your view, how can Sri Lanka manage its relationship with China without creating tension with India?
As stated earlier, Sri Lanka’s first priority is to survive the onset of strategic turbulence, likely to hit the Indo-Pacific region, between an assertive India and aggressive China. During 2024-’25, President Dissanayake has successfully done some tightrope walking to manage the rival pulls and pressures of India and China.
Comparing AKD’s visits to China and India
President Dissanayake visited China from 14-17 January. The joint statement issued after his meeting with President Xi Jinping is interesting when compared with the joint statement issued after the Sri Lankan President’s visit to New Delhi in December 2024.
Prime Minister Modi had affirmed “India’s continued commitment to support Sri Lanka in its economic stabilisation efforts for its economic recovery and economic growth”. PM Modi further assured President Dissanayake that India’s approach would be investment-based and grant-oriented to reduce the debt burden on Sri Lanka and to assist it in generating economic opportunities that are long-term, sustainable, and will eventually contribute to growing the absolute size of the Sri Lankan economy.
In contrast, the joint statement issued in Beijing gives a glimpse of how China views its relationship with smaller countries like Sri Lanka. China focused on “mutual trust, support, respect, win-win cooperation, and common development” while reiterating its “commitment to an independent foreign policy of peace”. It expressed its “firm support for Sri Lanka in safeguarding its independence, sovereignty, and territorial integrity”.
Sri Lanka, while reaffirming this, reiterated its “commitment to an independent, non-aligned foreign policy”. Sri Lanka further expressed its “commitment to the One China principle, recognising the People’s Republic of China as the sole legal government representing the whole of China, and Taiwan is an inalienable part of China’s territory” along with strong opposition to “Taiwan independence”. Sri Lanka pledged not to allow anti-China or separatist activities on its territory.
For the first time, Sri Lanka “reassured its support to China regarding its policies with Xizang (Tibet) and Xinjiang”. The explicit emphasis on Tibet and Xinjiang for the first time shows China’s anxiety in seeking reassurance from a Buddhist country like Sri Lanka. Some of the other agreements of interest signed during the visit are discussed below.
Energy security and Hambantota Oil Refinery
During AKD’s visit to Beijing, an agreement was signed with Sinopec Group for establishing a state-of-the art oil refinery in Hambantota. The refinery, estimated to cost $ 3.7 billion, will have a capacity of 200,000 barrels daily, mainly for export. It also reflected the significance of Hambantota as a strategic economic hub for China.
Sri Lanka opting for a high-cost oil refinery project might appear contrary to its goal of achieving energy self-sufficiency through renewable energy sources by 2030. However, it gives Sri Lanka the option to diversify its energy sources, reducing its dependence on imported refined petroleum products. It can also stimulate economic growth in the region and create jobs. Most importantly, the large-scale Chinese investment project strengthens Sri Lanka’s strategic partnership with China with potential for more investments in allied industries.
As against this, India’s approach towards Sri Lanka’s energy security is more holistic. The emphasis is on the need for reliable, affordable, and timely energy resources to meet the basic needs of the people. The Indian and Sri Lankan leaders had agreed to take steps towards the implementation of the solar power project in Sampur, continue discussion on the supply of Liquefied Natural Gas (LNG) from India to Sri Lanka, and establish a high-capacity power grid connecting India and Sri Lanka.
Both countries also agreed to cooperate with the UAE to implement a multi-product pipeline from India to Sri Lanka to supply affordable energy. They had also agreed to jointly develop offshore wind power potential in the Palk Strait, paying attention to environmental protection. Both leaders had agreed to continue with the development of the Trincomalee Oil Tank Farm and develop Trincomalee as a regional energy and industrial hub.
Financial and technical assistance
China granted Sri Lanka RMB 500 million for economic and technical cooperation. It also agreed to create an Investment and Economic Cooperation Working Group to enhance bilateral trade and encourage investments.
The Central Bank of Sri Lanka (CBSL) and the People’s Bank of China (PBOC) renewed their Bilateral Currency Swap Agreement in December 2024. This agreement, originally signed in 2021, allows for a currency swap facility of RMB 10 billion (approximately $ 1.4 billion). The renewed agreement extends the facility for another three years. The financial cooperation agreement aims to enhance economic stability and support trade between the two countries.
As against this, India’s Reserve Bank of India (RBI) and the CBSL entered into a Bilateral Currency Swap Agreement on 24 July 2020. This was part of the SAARC Currency Swap Framework 2019-’23. Under this agreement, the CBSL can draw up to $ 400 million in multiple tranches to meet short-term forex requirements. The CBSL and RBI are also discussing securing an additional $ 1 billion under a special swap agreement.
BRI and maritime cooperation
Greater commitment has been expressed for the integrated development of infrastructure projects – such as Port City Colombo and the Hambantota Port – which are expected to draw more investments and offer economic opportunities.
China also wants Sri Lanka’s participation in the BRI Green Development Coalition in view of climate change. They have agreed to collaborate in disaster prevention, mitigation, and emergency management and rescue.
They are also expected to negotiate a Memorandum of Understanding on Ocean Cooperation Towards Blue Partnership for sustainable use of ocean resources. This will mean more Chinese ‘research ships’ visiting Sri Lanka’s neighbourhood.
Security cooperation with China and India
China and Sri Lanka in their joint statement recognised “judicial, law enforcement, and security cooperation as an important component of bilateral cooperation, and stand ready to jointly crack down on cross-border crimes such as telecom fraud and online gambling. China is ready to do its best to support capacity building in Sri Lanka’s judicial, law enforcement, and security areas, and provide assistance with Police supplies.”
This is interesting as it may lead to the establishment of Chinese Police stations in Sri Lanka. According to a Brookings report “between 2016 and 2022, four local Chinese public security bureaus established 102 overseas Police service stations in 53 countries across North and South America, Europe, Africa, and Asia”.
India’s security cooperation with Sri Lanka is on a different level. The New Delhi joint statement says the two countries “reaffirmed their commitment to work together in countering traditional and non-traditional threats, as well as to ensure a free, open, safe, and secure Indian Ocean Region. India being Sri Lanka’s closest maritime neighbour, President Dissanayake reiterated Sri Lanka’s stated position of not permitting its territory to be used in any manner inimical to the security of India as well as towards regional stability.”
The two countries agreed to explore the possibility of concluding a framework agreement on defence cooperation. India had also agreed to extend assistance in providing defence platforms and assets to augment Sri Lanka’s defence capabilities with tailormade training programmes.
Enterprise support
China has agreed to continue supporting Sri Lankan tea, gems, and other enterprises. This programme “would propel exports of Sri Lankan goods”. The leaders’ discussion “included various ways to push forward digital transformation, green development, and logistics to offer Sri Lanka an opportunity to introduce modernised activities within industries.
During President AKD’s New Delhi visit, he expressed Sri Lanka’s interest in exploring the establishment of people-centric digitisation as in India to improve governance, service delivery, and social welfare.
Accordingly, India agreed to help in expediting implementation of the Sri Lanka Unique Digital Identity (SLUDI) project and assist Sri Lanka to roll out Digital Public Infrastructure (DPI). India had also agreed to promote digital financial transactions by extending the use of Unified Payments Interface (UPI) digital payments to benefit both countries.
(The writer is a retired MI specialist on South Asia and terrorism, and served as the Head of Intelligence of the Indian Peace Keeping Force [IPKF] in Sri Lanka from 1987-’90. He is associated with the Chennai Centre for China Studies. Email: haridirect@gmail.com; website: https://col.hariharan.info)
(The views and opinions expressed in this article are those of the author and do not necessarily reflect the official position of this publication)