Welcome 2022: Lessons learnt and future manoeuvres?

It will not be correct for anyone to presume that India will need to strike a business deal here but its main concern is to secure its interests as a regional power. Even if a neutral third-party country engaged in oil explorations and exports comes forward to utilise the tanks for a purely business purpose, the new company shared by India and Sri Lanka could discuss among them how to share the benefits while safeguarding the sovereign rights of Sri Lanka as long as India’s security is not compromised

Many things are in the offing with the dawn of the New Year. All signs indicate that it is going to be a year of change, planets as well as political stars, and the latter not so much as a response to stimuli but as a compulsion under developing demand and pressure. Of the several or few changes contemplated and anticipated eagerly by virtually dissipated majorities, I thought of dealing with some relevant and imminent projections in the broader interest of the country at large.

Rolling stone gathers no moss 

A cabinet reshuffle is strongly contemplated. Why required is best known to the ones holding portfolios and the ones responsible for appointing them. Anyway, the need for a change, shows that the usefulness of continuing some in their domains, causes concerns requiring attention. In the process, because the same pack is shuffled, some despite their fruitfulness get displaced. Sometimes, the changes are affected due to succession planning, requiring training grounds for those ear-marked to take over the batons and build up their fortunes to enable them to maintain the family history and the hereditary domain. 

Well, these are any way beyond the authority of the people in a democratic set up because their democratic rights have been passed onto those whom they elect. Fact of the matter is the country needs some new thinking, new approaches and new synergies. Let us hope that 2022 will bring about the emergence of some new blood with good exposures to civic life, virtuous and experienced in political realities. It will be an exercise worth going even outside the pack with statutorily possible replacements.

Need for economic stability

I thought of quoting from late S.W.R.D.’s contributions on the subject. On 28 April 1959 he had to state as follows; “It is our objective, naturally, amidst various difficulties that face us, to move forward to a, if not glorious present and future, at least to one that will give a reasonable measure of peace and prosperity and happiness to our people. That is a task in which many of our countries are engaged in, amidst, as you know, difficulties of various kinds that have cropped up, from time to time.

Of course, the type of assistance that we have been getting is invaluable. It is most helpful to us in those tasks of reconstruction and achievement of economic stability towards which we have all striven.” 

Strangely he was addressing a session of the Ceylon-American Economic and Technical Cooperation Programme. While I am not interested in the prophetic element involved, the emphasis he has made is highly relevant to us. It is true that we do not have persons of the calibre of SWRDs now but there is a lot to learn in the analytics it provides. 

His emphasis is on the issue of offering reasonable relief to people and the value of assistance forthcoming from various possible sources. In a Cabinet where some members are threatening resignation if we seek IMF assistance, the policymakers are put into a straitjacket far too narrow in the context of a plight we are facing currently and remaining exposed to highly unpredictable situations. Considering options within our control without subjecting ourselves to hard conditionalities is not bad, but it is highly illogical to be confined to a self-imposed taboo leading to consequential social constraints. And it is worse when this is happening while we continue as committed members of the IMF. Dealing with obstinate, suspicious, foolish pig-headed old people is itself an encumbrance to society. 

In reality we have external foreign exchange liabilities (obligations) which will have to be addressed seriously beyond the projected possibilities. $ 500 towards International Sovereign Bonds in January 2022 and another $ 1 billion in July 2022. As it is, it is far too much to be left open to the probability of uncertain sources. We also have to meet a foreign currency debt service payment amounting to $ 6.9 including principal and interest during 2022. It is a recurring obligation totalling about $ 26 billion $ as principal and interest due for the period from 2022 to 2026. 

Because of this situation it becomes important to have in place a guaranteed program in place to meet this situation. A restructuring plan is the only option if we have to make the consequences more tolerable to the masses. The PBOC currency swap of CNY 10 billion, no doubt is a great relief and we should appreciate its successful negotiation.

There is serious lobbying by leading business circles that we should delay repayments and face the situation like many other countries they cite in a list of those who have defaulted on their loans. With a clean history of honouring all our previous obligations it would be an extremely degrading exercise for us to engage in. A restructuring plan in place through an acceptable international organisation will boost up the confidence and give us breathing space until we readjust ourselves to prepare for the long-term solution. IMF offers a wide spectrum of multilateral financing and restructuring is one such which will provide us with a certain degree of debt sustainability.

Economic revival plans

Trinco oil tank farm is in focus today as one of the feasible options available to us in our economic recovery. A successful scheme in place on a credible footing will no doubt help us address many issues including current account deficit as well as the downward trend of the foreign reserves. But it depends how we negotiate the deal. We are well-aware that our past experiences in securing FDIs for development activities have not been concluded in the best interest of the country. 

In fact, we have heard from different sources that such negotiations were more focused on the margins available to the deciding authorities than the focus on adapting favourable terms to the project and the country. Our indebtedness today due to those have become more burdensome due to this. More time, energy and influence have been devoted to address the commission factor than the project viability and the returns.

Learning from this experience the oil tank farm is a golden opportunity to strike a highly profitable deal with lasting benefits on a sustainable basis. From what is transpired through media announcements it appears that the hurdles and obstacles they either visualised or conveyed deliberately, are not there. It is not long ago that we heard Minister Udaya Gammanpila stating that the oil tanks are already given to be under the control of Indian authorities. 

But according to the latest information, they have been able to strike an agreement to allow the 14 tanks earlier given to IOC to continue further with them while Sri Lanka will get the complete and free control of 24 tanks leaving the balance 61 to be vested in a company to be established as a joint venture between India and Sri Lanka on a 49-51% sharing basis. On the face of it, sounds a fairly reasonable resolution compared to the impasse (imbroglio) highlighted at the outset by Minister Gammanpila himself. 

In Sri Lanka even a good thing happens in a suspicious background. This is the most unfortunate situation we are faced with. Truth and clarity become so scarce for no reason. What was given to understand was that in 1987 in an agreement the former President JRJ had with Prime Minister Rajiv Gandhi he had agreed with India that we cannot do anything with the Trinco oil tanks without India. We were given the impression that they were virtually sold out to India. But when we examined the Accord reached between the two countries in 1987 there is no such clause or understanding expressed to that extent. 

This is the historic truth about it. 

The Indo Sri Lanka Agreement was signed by Indian Prime Minister Rajiv Gandhi and Sri Lankan President J.R. Jayawardene on 29 July 1987. The Exchange of Letters that preceded the signing of the Agreement declared: “Trincomalee or any other ports in Sri Lanka will not be made available for military use by any country in a manner prejudicial to India’s interests,” and that the “work of restoring and operating the Trincomalee Oil Tank will be undertaken as a joint operation between India and Sri Lanka.”

Now the key words are “not to give any port of Sri Lanka, not only Trinco to be used for any military purposes by any country,” and the restoration of Trinco Oil Tanks to be undertaken as a joint operation between the two countries India and Sri Lanka.

Operating the oil tanks as a joint operation does not attribute any ownership right to India but leaves room wide open for both countries to negotiate and mutually agree on what the joint operation is. In other words, this provides a very wide forum and spectrum to discuss matters to reach a mutually acceptable understanding.

This is what he stated in Parliament, inter-alia, about this matter, “even after the current 35-year agreement ends in 2038, we cannot go with any other investor. We have to go only with India as per the 1987 accord…”

Minister Gammanpila has overlooked the fact that the understanding was in the exchange of letters stage and there is no reference whatsoever to that understanding in the Accord per se. It may even be that India was not so interested in that aspect while entering into the 1987 Accord. The Accord specifically refers to many other conditionalities the countries agreed on along with the contents in an annexure referred to therein which does not contain any details or particulars about the oil tanks.

Therefore Minister Gammanpila should take note of these facts and enter into an agreement with India taking into account the spirit and the intention of the proposal made during the exchange of letters stage prior to signing the Accord. We cannot forget the involvement of India in the LTTE issue from Prime Minister Indira Gandhi’s time. For any negotiations the background scenario should be taken into account. Hence, we set out below for the information of Minister Gammanpila the sequence of events preceding the Indo-Sri Lanka Accord of 1987;

1. India from the time of Indira Gandhi and even under Rajiv Gandhi supported the LTTE interests towards a secessionist movement

2. They provided a sanctuary to train Tamil guerrillas in Tamil Nadu, due to pressure from Tamil Nadu politicians as well as the concerns about the regional security issues linked to US, Pakistan and China.

3. During JRJ times India expressed in no-uncertain terms that armed intervention in support of the Tamil Movement in Sri Lanka would be considered if any diplomatic solutions failed 

4. In June 1987 Sri Lankan army took control of Jaffna and accusing the ongoing operations as a humanitarian crisis, India called on the Sri Lanka Govt. to halt the action and to pursue a political solution.

5. As this failed India on 2nd June 1987 announced that it would send a convoy of unarmed ships to the North to provide humanitarian support but the Sri Lanka Navy did not allow it.

6. Then 4th June 1987 Indian airforce commenced Operation Poomalai and heavily armed Indian Fighter planes flew over Jaffna and airdropped 25 tons of food supplies.

7. President JRJ offered to hold talks with Rajiv Gandhi and this led to the July 29th 1987 Indo-Sri Lanka accord and the IPKF came to Sri Lanka. The Sri Lanka Army withdrew.

8. The IPKF withdrew in 1990.

9. In 1991 Rajiv Gandhi was assassinated by LTTE in India

10. In Jan 1995 Sri Lanka Govt. (Ranil Wickremesinghe) and the LTTE agreed on a ceasefire to start negotiating a peace agreement. But in three months LTTE unilaterally resumed hostilities.

11. In 2009, Sri Lanka army captured the LTTE areas and eradicated the LTTE.

12. This operation was not opposed by India but instead received the Indian diplomatic and military support.

These events show the interest India had in the LTTE matter. They were all time worried about their national and regional security. 

Minister Gammanpila can use this information in his negotiations of a successful business deal encircling the 61 oil tanks to be shared on a business basis with India. It will not be correct for anyone to presume that India will need to strike a business deal here but its main concern is to secure its interests as a regional power. Even if a neutral third-party country engaged in oil explorations and exports comes forward to utilise the tanks for a purely business purpose, the new company shared by India and Sri Lanka could discuss among them how to share the benefits while safeguarding the sovereign rights of Sri Lanka as long as India’s security is not compromised.

Other important areas to be taken into account and included in the economic recovery plan will be dealt with in a second article to follow.