BACKGROUNDER No. 3393 | MARCH 14, 2019 Sri Lanka: A Test Case for the Free and Open Indo–Pacific Strategy Jeff M. Smith Abstract Sri Lanka, an island nation straddling the Indian Ocean’s crucial trad- Key Points ing routes, witnessed a substantial expansion of Chinese influence during the tenure of President Rajapaksa from 2005 to 2015. Sev- n Sri Lankan–U.S. ties have flour- eral multibillion-dollar Chinese investments in critical infrastructure ished since President Mahinda resulted in the rapid accumulation of debt, “white elephant” projects, Rajapaksa was ousted in 2015. Sri Lanka has become a new and widespread corruption, offering a model case study for the risks logistics hub for the U.S. Navy in associated with China’s Belt and Road Initiative (BRI). Since Rajapaksa the Indian Ocean. lost his re-election bid in 2015, Sri Lankan–U.S. relations have flour- n ished, and Sri Lanka has become an important partner in the Trump During the Rajapaksa era, Sri Lanka was saddled with Chinese Administration’s vision for a Free and Open Indo–Pacific. In late 2018, debt and “white elephant” infra- the country’s politics were thrown into turmoil when President Sirisena structure projects. The current attempted to install Rajapaksa as prime minister via a soft coup. The government has tried to improve unconstitutional effort failed, yet political forecasters are predicting governance and renegotiate the the return to power by the influential Rajapaksa family in forthcoming terms of engagement with China. elections. If mishandled, a return of the Rajapaksas could jeopardize n After a failed attempt at a soft recent gains in Sri Lankan–U.S. relations, offer Beijing another foot- coup in late 2018, Rajapaksa is hold in the Indian Ocean, escalate the rivalry between China and India, threatening a comeback in 2019. and pose a setback for the Trump Administration’s regional strategy. Washington must ensure that the Moving forward, the U.S. must: (1) hold any future Sri Lankan govern- democratic process is respected ment accountable to basic democratic and humanitarian standards, (2) in forthcoming elections. prioritize diplomatic and military engagements with Sri Lanka, and (3) n Rajapaska and various fam- leverage regional alliances and new development finance tools to provide ily members were accused of Sri Lanka with alternatives to the BRI that value sovereignty, sustain- human rights abuses, political repression, and autocratic ten- ability, transparency, and democratic governance. dencies, but they remain genu- inely popular in Sri Lanka. ver the past three years, Sri Lanka has been a bright spot for n U.S. strategy must deepen U.S. foreign policy in the Indo–Pacific. The coalition govern- O diplomatic and military engage- ment with Sri Lanka, draw This paper, in its entirety, can be found at http://report.heritage.org/bg3393 contrasts between the U.S. and The Heritage Foundation Chinese development models, 214 Massachusetts Avenue, NE and improve coordination with Washington, DC 20002 regional partners. (202) 546-4400 | heritage.org Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an attempt to aid or hinder the passage of any bill before Congress. BACKGROUNDER | NO. 3393 MARCH 14, 2019 MAP 1 Sri Lanka Overview • Population: IRAN PAKISTAN 21.4 million CHINA • 25,332 square miles (similarly sized to Strait of Hanoi West Virginia) Hormuz INDIA BURMA • 2019 Index of OMAN BANGLADESH Economic Freedom Score: 56.4 (Mostly Unfree), ranked 115 Arabian Bay of Bengal Bangkok out of 180 nations Sea • GDP (PPP): $274.7 billion Sri Lanka Malacca • GDP per capita Colombo Strait (PPP): $12,811 Kuala • Unemployment: 4.1% Pacific Ocean Lumpur Singapore SOURCE: Terry Miller, Anthony B. Kim, and James M. Roberts, 2019 Index of Economic Freedom (Washington: The Heritage Foundation, 2019), http://www.heritage.org/index. BG3393 heritage.org ment led by President Maithripala Sirisena and the and parliamentary elections scheduled to take place more reform-minded prime minister, Ranil Wick- in 2019 and 2020, followed by a deeper dive into the remesinghe, has expanded relations with the U.S. history of the family and their controversial role in and India to balance the country’s firm embrace of Sri Lankan politics. A comprehensive review of Sri China during the tenure of President Mahinda Raj- Lankan–U.S. relations is then offered before moving apaksa (2005–2015). to policy recommendations for the U.S. government In order to maintain positive momentum in bilat- and a conclusion. eral relations and prepare for a potential return to power by Rajapaska and his family, the U.S. will have Background on Sri Lanka to employ a comprehensive strategy that elevates the A democratic nation of 22 million citizens (70 per- importance of diplomatic and military engagement cent Buddhist, 13 percent Hindu, 10 percent Muslim, with Sri Lanka, draws contrasts between the U.S. and 7 percent Christian) with a gross domestic product Chinese development models, deploys new tools of of roughly $90 billion, Sri Lanka’s modest stature development finance effectively, and improves coordi- obscures its substantial geostrategic potential. A nation with regional partners, such as India and Japan. central hub positioned at the mid-point of the Indian This Backgrounder examines recent trends in Sri Ocean, Sri Lanka lies halfway between the east coast Lankan politics and foreign policy as well as the state of Africa and the Strait of Malacca. of Sri Lankan–U.S. relations while offering policy rec- Some 30,000 naval vessels, 45,000 aircraft, and ommendations to the U.S. government. It begins with 4,500 oil tankers traverse Sri Lanka’s 200-nautical- a brief overview of Sri Lanka’s growing geopolitical mile exclusive economic zone each year, connecting profile before reviewing the political crisis sparked energy consumers in East Asia with energy suppli- by President Sirisena’s attempt to install ex-Presi- ers in the Middle East. “You can’t get from Hormuz dent Rajapaksa as prime minister in October 2018, to Malacca—or from the Red Sea to the South China an attempt that ultimately failed. Sea—without going near Sri Lanka,” observed the The Backgrounder then explores the prospects that former head of U.S. Indo–Pacific Command (USIN- the Rajapaksas will return to power in presidential DOPACOM), Admiral Harry Harris. He calls it “the 2 BACKGROUNDER | NO. 3393 MARCH 14, 2019 MAP 2 Major Trans-Pacific Shipping Routes Pass Sri Lanka Tehran IRAQ AFGHANISTAN IRAN CHINA Cairo PAKISTAN New Delhi Dubai SAUDI ARABIA INDIA Mumbai Bay of Bengal Arabian Bangkok Sea Sri Lanka South China Colombo Kuala Sea Lumpur Indian Ocean Jakarta NOTE: Trade routes are approximate. SOURCE: Heritage Foundation research. BG3393 heritage.org pearl of the Indian Ocean on one of our planet’s most vast majority of these projects are not conventional critical trade routes.”1 investments but loans to Sri Lanka at commercial Before 2009, Sri Lanka was perhaps best known interest rates.) for the government’s decades-long counterinsurgency These projects remain the subject of intense con- campaign against the Tamil Tigers. A terrorist group troversy and international debate. They even made claiming to defend the rights of the country’s Hindu their way into an October 4, 2018, speech by Vice Tamil minority, the Tigers led the world in suicide President Mike Pence, who used China’s infrastruc- bombings from 1980 to 2003.2 When the group was ture projects on the island as a warning of the risks decisively crushed by a military offensive ordered associated with Beijing’s expansive Belt and Road by then-President Rajapaksa in 2009, international Initiative (BRI).3 China, he argued, had saddled Sri attention shifted to China’s expanding footprint on Lanka with unsustainable debt, which it then lever- the island, and its multibillion-dollar “investments” aged to pressure Colombo into transferring the Chi- in Sri Lankan ports and infrastructure projects. (The nese-built Hambantota port to a Chinese firm on a 1. Harry B. Harris, Jr., “Sri Lanka Galle Dialogue,” U.S. Indo-Pacific Command, speech, November 28, 2016, http://www.pacom.mil/Media/ Speeches-Testimony/Article/1013623/sri-lanka-galle-dialogue/ (accessed January 30, 2019). 2. National Public Radio, “Tamil Tigers: Suicide Bombing Innovators,” May 21, 2009, https://www.npr.org/templates/story/story. php?storyId=104391493 (accessed February 27, 2019). 3. Hudson Institute, “Vice President Mike Pence’s Remarks on the Administration’s Policy Toward China,” video and transcript, October 4, 2018, https://www.hudson.org/events/1610-vice-president-mike-pence-s-remarks-on-the-administration-s-policy-towards-china102018 (accessed January 30, 2019). 3 BACKGROUNDER | NO. 3393 MARCH 14, 2019 99-year lease. Separately, Chinese firms have been the more reform-minded United National Party accused of corrupt practices, making illegal cam- (UNP) assumed the role of prime minister later that paign donations to Sri Lankan officials, and includ- year. After years of personal differences and infight- ing sovereignty-violating provisions in deals negoti- ing, including over the prime minister’s attempts ated in secret.4 at economic liberalization, tensions came to a head After tilting toward China for years, President in October 2018. Rajapaksa witnessed a surprise upset in the 2015 To balance the billions in Chinse debt the Raj- presidential election, being narrowly defeated by a apaksa government had accrued, Wickremesinghe former ally, Maithripala Sirisena. After parliamen- sought to court new investments from India. During tary elections that year, Sirisena went on to form a a trip to Delhi in April 2017, he signed several tenta- coalition government with one of his political rivals, tive agreements outlining new infrastructure proj- Prime Minister Ranil Wickremesighe. The new gov- ects for Indian firms.