Sri Lanka plays an important role in the geopolitical relations between India and China. Interaction with two important regional powers, India and China, plays an important role in shaping the geopolitical landscape. Both countries have invested significantly in the island, driven by strategic and economic objectives that sometimes align and sometimes diverge. Nonetheless, Sri Lanka faces the complex challenge of mitigating the growing influence of both countries, a scenario that requires careful diplomatic engagement, thorough economic assessment and a well-considered strategy of neutrality.
Sri Lanka’s strategic location positions it as an important entity in the Indian Ocean. For centuries, its strategic location at the crossroads of East-West trade routes has made it a vital component in the structure of global commerce. With the expansion of the port of Colombo and a proposed network of logistics hubs, the Hambantota port has attracted considerable attention from India and China as both countries strive to strengthen their strategic presence in the region.
The Belt and Road Initiative (BRI) projects executed by China in Sri Lanka have led to considerable financial investment in infrastructure enterprises, particularly Hambantota Port and Colombo Port City, strengthening Sri Lanka’s economic ties with Beijing. India has judiciously directed resources towards energy initiatives, port infrastructure and cultural engagement, with the aim of reducing Chinese dominance. Both nations provide important avenues for advancement; Yet, they exhibit different approaches, driving forces, and inherent risks.
India shares deep historical, cultural and trade relations with its nearest neighbor Sri Lanka. The circumstances surrounding the Tamil population in northern Sri Lanka are complex and significantly influence India’s diplomatic approach towards Colombo. India’s investments in Sri Lanka’s renewable energy, infrastructure and regional connectivity exemplify its strategic approach in line with its Neighbor First policy.
The relationship between India and Sri Lanka is significant, rich in both cultural and historical aspects, characterized by exchanges spanning over 2,500 years. The introduction of Buddhism to Sri Lanka by Mahinda, son of Emperor Ashoka in the 3rd century BCE, represents an important cultural connection. Mahinda was sent as a Buddhist missionary to the Kingdom of Anuradhapura in Sri Lanka where he resided in Mihintale.
India has established itself as an important trading partner for Sri Lanka, with bilateral merchandise trade valued at approximately $3.6 billion in 2020. Furthermore, India has taken an important position as an investor in Sri Lanka, with the majority of total foreign direct investment (FDI) coming from India. Approximately $1.7 billion from 2005 to 2019.
Sri Lanka’s strategic location within the Indian Ocean makes it an essential participant in the complexities of regional geopolitics. The geographical proximity of Sri Lanka significantly contributes to enhancing India’s maritime security and facilitating trade routes. Nearly 60% of India’s transshipment cargo is handled by Sri Lankan ports, highlighting the island’s important position in the context of Indian trade.
India demonstrates a deep understanding of China’s growing influence in its region. The New Delhi government views the 99-year lease of Hambantota port to China as a significant strategic challenge, highlighting Sri Lanka’s complex geopolitical balance.
China’s involvement in Sri Lanka involves complex economic and strategic aspects. The Hambantota Port and Colombo Port City projects represent important efforts within the BRI, aimed at establishing strategic control over sea lanes in the Indian Ocean. Chinese investments provide the capital and infrastructure needed for Sri Lanka’s progress; However, they have important long-term implications. Concerns regarding debt viability and erosion of sovereignty, particularly in light of incidents such as Hambantota, have intensified scrutiny of Beijing’s strategies.
China views Sri Lanka as an essential component in its strategic “string of pearls” aimed at building a network of ports in the Indian Ocean to protect its maritime interests. The establishment of the Hambantota port, financed by Chinese loans and executed by a Chinese enterprise, is a clear example of this approach. The transfer of the port to Chinese administration through a 99-year lease has sparked discussion about China’s influence and the consequences of what is often referred to as debt-trap diplomacy.
Recent developments have deeply impacted the complexities of relations with India, China and Sri Lanka. In December 2024, Sri Lankan President Anura Kumara Dissanayake made his first foreign visit to India, where he held talks with Prime Minister (PM) Narendra Modi. The discussions focused on the progress of bilateral relations, resulting in agreements on electrical grid connectivity and building a multi-product petroleum pipeline with the aim of strengthening economic and energy cooperation. President Dissanayake emphasized that Sri Lanka will not allow its territory to be used in a way that threatens India’s interests, demonstrating a commitment to maintaining strong ties with New Delhi.
Additionally, China’s involvement in Sri Lanka, especially with regard to infrastructure advancement, is noteworthy. The Hambantota International Port, managed by a Chinese joint venture under a 99-year lease, has developed into a notable transshipment hub in the Indian Ocean, particularly for automobile cargo. This is a major illustration of China’s strategic investment in the port sector, raising concerns about the potential for India’s encirclement and expansion of influence. Sri Lanka’s geographical location in the Indian Ocean positions it as a key focus in the geopolitical rivalry between India and China, as both countries attempt to protect their interests and extend their influence over the island nation.
It is important to build cordial relations with both India and China. The support given to Dissanayake by both countries following his election reflects a calculated interest in promoting stronger relations with Sri Lanka. The current administration takes responsibility for using these partnerships to attract investment that can facilitate economic recovery, especially after the financial crisis of 2022.
In December 2024, President Dissanayake chose India for his inaugural official visit, underscoring India’s intention to strengthen its ties with New Delhi. Several notable agreements were reached during the discussions with Prime Minister Narendra Modi and various Indian officials. India has underlined its intention to provide liquefied natural gas (LNG) to Sri Lanka, aiming to ease the island’s energy deficit and reduce its dependence on coal. India has allocated additional financial resources for the expansion of Kankesanthurai Port in northern Sri Lanka with the aim of improving connectivity and promoting trade between the two countries. The two countries have formalized an agreement designed to promote the Ramayana Trail, encompassing several places associated with the ancient epic, with the aim of boosting tourism and deepening cultural ties. The visit highlights Sri Lanka’s intention to strengthen its historical and cultural ties with India. At the same time, economic cooperation is being taken forward to deal with immediate domestic issues.
Sri Lanka has been carefully managing its diplomatic relations with both India and China, attempting to avoid any potential conflict with either country. Although there are significant benefits to both countries, inadequate monitoring of these relationships could expose Sri Lanka to significant risks. Colombo’s emphasis on economic diversification through strategic exploration of investments from various countries and organizations, such as Japan, the European Union and the United States, reflects a sophisticated approach to efficiently deal with this complex situation. Diversification serves to reduce the risks associated with excessive dependence on India or China, thus providing a safeguard against the political and economic consequences inherent to bilateral agreements. Clearly expressed agreements are important; The lack of transparency in prior transactions, as evidenced by the Hambantota Port lease, has raised suspicions among both domestic and international stakeholders. Adhering to international standards and promoting inclusive decision-making processes will significantly increase trust between citizens and global partners. Furthermore, it is important for Sri Lanka to maintain a stance of strategic neutrality in broader geopolitical conflicts. While economic relations with China are undeniably important, it is imperative for Sri Lanka to engage in strategic partnerships with India and other regional actors related to security matters. This will facilitate the use of autonomous platforms and promote regional cooperation to maintain balance. By actively engaging in regional platforms such as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and the Indian Ocean Rim Association (IORA), Sri Lanka will be able to strengthen its ties with India, as well as provide some support to China. Will also provide assurance to some extent. A multilateral approach has the potential to significantly reduce the influence of any single partner, thereby promoting stability and enabling sustainable development.
Bilateral relations between Sri Lanka and both India and China reflect the complex dynamics of contemporary geopolitics, highlighting the imperative for small countries to maneuver through global power rivalry. By adopting a constructive strategy that emphasizes balanced engagement, economic diversification and transparent governance, Sri Lanka can effectively reduce the dangers associated with excessive dependence on any one power.
Sri Lanka’s upcoming trajectory will challenge the island’s diplomatic finesse and capacity to cope and develop. By adopting the principle of strategic autonomy, Sri Lanka has the potential to transform its weaknesses into strengths, thereby achieving sustainable stability and prosperity amid a changing global landscape.
This article is written by Kamakshi Vasan, Global COO, Tillotoma Foundation.
