Frederic Grare Courtesy The Strategist ASPI

The new president of Sri Lanka, Anura Kumara Dissanayake, will have to walk a fine line to return the country to its traditional foreign policy of non-alignment.

The country remains caught in a situation dangerously close to a zero-sum game of relationships with China and India, both of which are essential for its economic recovery. To help him stay out of that situation, Western countries should go beyond economic help and engage Sri Lanka in a larger and more comprehensive agenda.

Left-leaning Dissanayake has emphasized his desire to avoid entanglement in global rivalries and expressed his determination to balance Sri Lanka’s relations between India and China. The country tilted somewhat towards Beijing during the presidency of Mahinda Rajapaksa from 2005 to 2015.

A visit to Delhi, during which Dissanayake met both India’s foreign minister and national security advisor, was organised in February 2024 to reassure his powerful neighbour and give some credence to his stated intentions of neutrality.

Economic realities and geostrategic rivalries may soon challenge his positions of principle. Beijing provided US$11.2 billion in grants and loans for infrastructure projects in Sri Lanka from 2006 to 2022, while in 2017 Sri Lanka’s financial difficulties forced it to hand over control of the Hambantota port to China for 99 years. The bilateral relations between the two countries are now entrenched.

True, Sri Lanka’s 2022 economic crisis allowed India to regain influence. New Delhi provided a US$4 billion package in financial assistance, including food, medicine, fuel, currency swaps and loan deferments. It also deepened cooperation in areas such as infrastructure, energy and trade. Beijing provided US$75 million in humanitarian aid, though at first it was reluctant to restructure Sri Lankan debt.

While Dissanayake must be aware of the importance of Sri Lanka’s financial indebtedness to China, he also understands that India’s bailout was essential. And he knows that India is geographically close to Sri Lanka.

Still, political and geographical proximity did not prevent Mahinda Rajapaksa, president from 2005 to 2015, from tilting towards China when India refused to build the economically unsound Hambantota port. His brother Gotabaya, president from 2019 to 2022, confirmed the orientation. Even if Dissanayake is likely to adopt a more cautious approach with Beijing than his predecessors, he remains structurally tied to China.

Moreover, significant irritants remain in Colombo’s relations with New Delhi. In line with his electoral commitment not to let foreign powers buy more Sri Lankan national assets, Dissanayake has promised to cancel a proposed wind power project by India’s Adani Group. Maritime security matters also create occasional issues. Indian trawlers fish in Sri Lankan territorial waters in the Palk Strait, and Chinese naval and research ships use Hambantota.

All these factors indicate the difficulty of the new government’s position. Even if the new president has committed to ensuring that Sri Lanka’s sea, land and airspace would not be used in ways that would threaten India or regional stability and has recognised the importance of India’s support in development efforts, he is not immune to pressures on both sides.

Dissanayake seems determined to enlarge the pool of Sri Lanka’s foreign investors. But he is stuck with contracts with China concluded in the Rajapaksa era, which, combined with inept governance and corruption, contributed to the country’s economic crisis in 2022.

Other countries have undertaken several initiatives to help Sri Lanka get out of its economic predicament. It got a US$2.9 billion bailout loan from the IMF and benefits from the EU Generalized System of Preferences. The Paris Club has restructured its debt.

However, these measures are temporary by nature and not enough to prevent Sri Lanka from drifting into China’s lap. They should be part of a larger and more comprehensive agenda, including Western efforts to build a stable and mutually beneficial security relationship with Sri Lanka, particularly in maritime security.

Regional maritime cooperation, and capacity building in particular, would suit the pragmatism of Dissanayake and balance China’s occasional naval presence. It wouldn’t exclude China, so Sri Lanka would be left in the middle, where Dissanayake wants to be.

It would reassure India much more effectively than any promise by the new president.

The French government has recently initiated a joint venture with the Kotelawala Defence University to set up a maritime security school in the Trincomalee region as part of its broader strategy for the Indian Ocean. This could be the basis for larger cooperation. Other countries, such as Australia, could join the effort, turning the exercise into minilateral cooperation that would benefit the entire region—and Dissanayake’s policy in particular.