Sri Lanka is only the world’s opening act. Disturbances there constitute the first in a series of crises about to engulf vulnerable countries, perhaps even large ones. The war in Ukraine, aggravating underlying problems in Sri Lanka and elsewhere, is shaking just about every corner of the planet.
Events in Sri Lanka also highlight how China is going about dominating the world. Beijing is corrupting national leaders, drowning them in debt, and ultimately destabilizing their governments. Beijing, it appears, is particularly targeting democracies.
India’s urea, a fertilizer, will allow Sri Lankan farmers to plant in the May-to-August Yala cultivation season. It comes at a time of critical need. The country had been spending about $400 million annually to import fertilizer but had not been able to make purchases recently due to the lack of foreign exchange. The government last year, to conserve currency reserves, banned chemical fertilizer.
The chemical fertilizer ban forced farmers to abandon paddies, and some joined the recent protests.
There is, as a result, hunger in the country, and soaring food prices have fueled protests.
The new prime minister, Ranil Wickremesinghe, said he would ensure that everyone had three meals a day.
That’s a promise Wickremesinghe may not be able to keep. Sri Lanka can’t solve its problems on its own. The COVID-19 pandemic ended tourism, a main source of revenue. Moreover, the Russian invasion of Ukraine—both countries are big sources of tourists for Sri Lanka—killed hopes for a recovery this year.
The issue, however, goes beyond tourist arrivals. The Ukraine war looks as if it’s ending a decades-long period of globalization, and this transition is going to be difficult for countries that are especially dependent on others. The Sri Lankan crisis, therefore, is only the beginning.
Sri Lanka also faces another difficulty: China. The dominant Rajapaksa clan, long thought to be in Beijing’s pocket, borrowed heavily from Chinese sources for misconceived ventures. Many of the “white elephant projects” are in the Hambantota district, the home of the Rajapaksas.
The Hambantota port, losing $300 million in six years, was ill-conceived from the beginning. Port operators, therefore, were unable to service $1.4 billion in loans from China. Close to the port is a rarely used $15.5 million conference center. Thanks to a $200 million loan from China, Sri Lanka was able to build the nearby Rajapaksa Airport, which couldn’t pay even its electricity bills.
In Colombo, Sri Lanka’s answer to Dubai is the Chinese-funded Port City, an island of 665 acres of landfill and a “hidden debt trap.” In that city is also the Lotus Tower, never opened to the public, also funded by China.
China extended around 17 percent of the country’s total debt. Very few know the full extent of the indebtedness to Chinese parties because there are hard-to-track loans to Sri Lanka’s state firms and to the country’s central bank.
The Chinese have established a pattern.
“China extends debt on onerous terms, backs up authoritarian governments when there are financial collapses or civil disobedience, and then takes everything it can find,” Cleo Paskal, of the Foundation for Defense of Democracies, told Gatestone.
This pattern is evident in Sri Lanka. In December 2017, Beijing took control of the Hambantota port, grabbing 70 percent of the equity and signing a 99-year lease, after that project couldn’t repay high-interest loans extended by China. Now there are concerns that Hambantota will eventually become a Chinese naval base.
China’s admirals have long eyed Sri Lanka: In both September and October 2014, the Sri Lankan government allowed a Chinese submarine and its tender to dock at the Chinese-funded Colombo International Container Terminal.
A base in Sri Lanka would allow Chinese aircraft and surface combatants as well as submarines to cut sea lanes in the Indian Ocean and force next-door India to divert military assets to a threatening presence.
It is no coincidence that Djibouti, also heavily indebted to Chinese parties, is now the site of China’s first offshore military base.
“This pattern is deep, entrenched, and expanding, and so it’s like the dominoes have all been set up and Beijing is perfectly happy to have them fall down so that it can come to the rescue economically and politically and entrench itself even more,” Paskal said.
Sri Lanka is now looking for a bailout from the International Monetary Fund, but that’s not necessarily a good idea. The international community shouldn’t be helping a voracious China gobble up small, vulnerable societies.
“It’s not financial restructuring that you need, it’s political restructuring that you need before you should put in any more money,” Paskal said. “If the IMF bails out Sri Lanka without ensuring that it is no longer aligned with Beijing, it will have subsidized Chinese investment and politically reinforced a country that becomes a Chinese proxy.”
