Sri Lanka plays a crucial role in the geopolitical interplay between India and China. The interactions with two significant regional powers, India and China, play a crucial role in shaping the geopolitical landscape. The two nations have engaged in considerable investments in the island, motivated by strategic and economic aims that at times align and at other moments diverge. Nonetheless, Sri Lanka confronts the complex challenge of navigating the growing influence of both nations, a scenario that necessitates meticulous diplomatic engagement, thorough economic evaluation, and a well-considered strategy of neutrality.
The strategic location of Sri Lanka establishes it as a significant entity in the Indian Ocean. For centuries, its strategic location at the intersection of East-West trade routes has made it a crucial component in the structure of global commerce. The Hambantota Port, in conjunction with the expansion of Colombo’s port and a proposed network of logistical hubs, has garnered considerable attention from India and China as both nations endeavour to strengthen their strategic presence in the region.
The Belt and Road Initiative (BRI) projects executed in Sri Lanka by China have led to considerable financial investments in infrastructure ventures, particularly the Hambantota Port and Colombo Port City, thus reinforcing Sri Lanka’s economic connections with Beijing. India has judiciously directed resources towards energy initiatives, port infrastructure, and cultural engagements, aiming to mitigate Chinese dominance. Both nations offer critical pathways for advancement; nonetheless, they demonstrate distinct approaches, driving forces, and inherent risks.
India shares deep historical, cultural, and trade connections with Sri Lanka, its closest neighbour. The circumstances surrounding the Tamil population in northern Sri Lanka are complex and significantly influence India’s diplomatic approach towards Colombo. The investments undertaken by India in Sri Lanka’s renewable energy, infrastructure, and regional connectivity exemplify a strategic approach consistent with its Neighborhood First policy.
The connection between India and Sri Lanka, rich in both cultural and historical aspects, is significant, characterised by exchanges that have endured for more than 2,500 years. The introduction of Buddhism to Sri Lanka, brought forth by Emperor Ashoka’s son Mahinda in the 3rd century BCE, represents a significant cultural connection. Mahinda was dispatched as a Buddhist missionary to the Anuradhapura Kingdom in Sri Lanka where he took up residence at Mihintale.
India has positioned itself as a significant trading partner for Sri Lanka, with bilateral merchandise trade approximating $ 3.6 billion in 2020. Furthermore, India has taken on a significant position as an investor in Sri Lanka, with Foreign Direct Investment (FDI) from India totaling approximately $ 1.7 billion from 2005 to 2019.
Sri Lanka’s strategic placement within the Indian Ocean renders it an essential participant in the complexities of regional geopolitics. The geographical proximity of Sri Lanka significantly contributes to the enhancement of India’s maritime security and the facilitation of trade routes. About 60% of India’s transshipment cargo is managed by the ports of Sri Lanka, highlighting the crucial position the island holds in the context of Indian trade.
India demonstrates a profound understanding of the growing impact that China wields within its territory. The government of New Delhi perceives the 99-year lease of the Hambantota Port to China as a significant strategic challenge, highlighting the intricate geopolitical equilibrium of Sri Lanka.
The involvement of China in Sri Lanka involves complex economic and strategic aspects. The Hambantota Port and Colombo Port City projects represent significant endeavours within the BRI, aimed at establishing strategic control over maritime routes in the Indian Ocean. Chinese investments offer essential capital and infrastructure for the progress of Sri Lanka; however, they carry significant long-term implications. The feasibility of debt and concerns regarding the erosion of sovereignty, particularly in light of events such as Hambantota, have intensified scrutiny of Beijing’s strategies.
China perceives Sri Lanka as an essential component in its strategic “String of Pearls,” with the objective of creating a network of ports in the Indian Ocean to safeguard its maritime interests. The establishment of Hambantota Port, funded by Chinese loans and executed by a Chinese enterprise, serves as a clear illustration of this approach. The transfer of the port to Chinese administration via a 99-year lease has ignited discussions regarding China’s influence and the consequences of what is frequently referred to as ]debt-trap diplomacy.
The recent developments have profoundly impacted the intricacies of engagement with India, China, and Sri Lanka. In December 2024, Sri Lankan President Anura Kumara Dissanayake undertook his first foreign visit to India, where he engaged in dialogues with Prime Minister (PM) Narendra Modi. The discussions focused on the advancement of bilateral relations, resulting in agreements to create electrical grid connectivity and a multi-product petroleum pipeline with the objective of fortifying economic and energy collaboration. President Dissanayake underscored that Sri Lanka shall not allow its territory to be utilised in a manner that might endanger India’s interests, demonstrating a dedication to preserving robust relations with New Delhi.
Simultaneously, China’s engagement in Sri Lanka merits attention, especially regarding infrastructure advancement. The Hambantota International Port, managed by a Chinese joint venture under a 99-year lease, has developed into a notable transshipment center in the Indian Ocean, particularly for automobile cargo. This port serves as a prime illustration of China’s strategic investments in the region, eliciting concerns for India about the possibility of encirclement and the broadening of influence. The geographical positioning of Sri Lanka in the Indian Ocean establishes it as a significant center in the geopolitical rivalry between India and China, as both countries endeavour to safeguard their interests and broaden their influence on the island nation.
It is imperative to cultivate a harmonious relationship with both India and China. The support extended by both nations to Dissanayake following his election reflects a calculated interest in fostering robust relations with Sri Lanka. The present administration bears the responsibility of utilising these partnerships to draw in investments that may facilitate economic recovery, especially in the aftermath of the 2022 financial crisis.
In December 2024, President Dissanayake selected India for his inaugural official visit, underscoring India’s intention to strengthen its relationship with New Delhi. Throughout discussions with PM Narendra Modi and various Indian officials, several noteworthy agreements were reached. India has outlined its intentions to provide liquefied natural gas (LNG) to Sri Lanka, aiming to mitigate the island’s energy deficiencies and reduce its dependence on coal. India has allocated additional financial resources for the enhancement of the Kankesanthurai Port in northern Sri Lanka, with the objective of improving connectivity and promoting trade between the two nations. The two nations have formalised an agreement designed to promote the Ramayana Trail, encompassing numerous locations linked to the ancient epic, with the objective of bolstering tourism and deepening cultural ties.This visit highlights Sri Lanka’s intention to fortify its historical and cultural connections with India while simultaneously pursuing economic cooperation to tackle urgent domestic issues.
Sri Lanka is carefully managing its diplomatic relations with both India and China, striving to avoid any potential conflicts with either country. While both nations present notable benefits, inadequate oversight of these relationships may expose Sri Lanka to substantial risks. Colombo’s emphasis on economic diversification through the strategic pursuit of investments from a diverse array of nations and organisations, such as Japan, the European Union, and the United States, reflects a sophisticated approach to adeptly navigate this complex situation. Diversification functions to mitigate the risks linked to an overreliance on either India or China, thus offering a protective measure against the political and economic consequences that are intrinsic to bilateral agreements. Clearly articulated agreements are crucial; the lack of transparency in prior transactions, as illustrated by the Hambantota Port lease, has engendered doubt among both domestic and international stakeholders. Adhering to international standards and fostering inclusive decision-making processes would greatly enhance trust among citizens and global partners. Moreover, maintaining a stance of strategic neutrality in broader geopolitical conflicts is crucial for Sri Lanka. While the economic ties with China are undeniably crucial, it is imperative for Sri Lanka to engage in strategic partnerships with India and other regional actors concerning security matters. This will facilitate the use of autonomous platforms and foster regional collaboration to sustain balance. Engaging actively in regional platforms like Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and Indian Ocean Rim Association (IORA) would enable Sri Lanka to strengthen its ties with India, while also providing a degree of reassurance to China. Multilateral approaches have the potential to considerably diminish the influence of any one partner, thus fostering stability and enabling sustainable growth.
The bilateral relationship between Sri Lanka and both India and China illustrates the intricate dynamics of contemporary geopolitics, highlighting the imperative for smaller nations to skillfully maneuver through the rivalries of global powers. By adopting a constructive strategy that emphasises balanced engagement, economic diversification, and transparent governance, Sri Lanka can effectively mitigate the dangers associated with over-dependence on any one power.
The forthcoming trajectory of Sri Lanka will challenge the island’s diplomatic finesse and its capacity to withstand and evolve. By embracing the principle of strategic autonomy, Sri Lanka has the potential to convert its vulnerabilities into strengths, thereby securing lasting stability and prosperity amidst the changing global landscape.
This article is authored by Kamakshi Wason, Global COO, Tillotoma Foundation.