US sees Sri Lanka as a great comeback story

US Assistant Secretary of State for South and Central Asia, Donald Lu, hailed Sri Lanka as an example of the success of the administration’s Indo-Pacific strategy in collaboration with partners such as India.

However, he also warned both Delhi and Dhaka that the security situation born out of the Rohingya refugee crisis and the general instability in Myanmar will worsen and continue to have implications for neighbours.

Offering a glimpse into Washington DC’s thinking into India’s neighbourhood, Lu also said that he told authorities in Maldives during a recent visit that China will be a good partner to the country only if Beijing knew and faced “real competition” from others.

He also acknowledged the Indian leadership of Indian Ocean and the need to work in the region, pointing to the imminent discussions between India and the US on what they can do together in littoral states in Africa.

Lu was speaking at a high-powered panel along with other administration officials from the State Department, National Security Council and Pentagon to mark two years of the Joe Biden administration’s Indo-Pacific strategy at US Institute of Peace (USIP), a thinktank in Washington DC, last week.

Instead of listing out the many accomplishments of the strategy, Lu said he would like to narrate “a comeback story”.

A year-and-a-half ago, Sri Lanka was in crisis with “mass riots on the streets, lines for petrol and food… the seizing of the President’s home, protesters swimming in his swimming pool”. But, Lu added, “If you have been to Sri Lanka lately, it is a very different place. Currency is stable. Goods and fuel prices are stable. They have gotten reassurances on their debt restructuring. And IMF money is flowing.”

How did this happen? The State Department top official on the South Asia desk said that this turnaround happened “with a little help from friends”. Lu said that the Indo-Pacific strategy is based on the premise that US and like-minded partners would try to offer a better proposition.

In the case of Sri Lanka, this meant that at the beginning of the crisis, what the island state needed was humanitarian assistance. “What we saw was countries like India coming up with concessional loans that allowed Sri Lanka to bring in vital supplies during the most difficult time. USAID, during the same days, provided hundreds of millions of dollars in agricultural inputs, fertilizers and seeds, so farmers could grow their own crops.”

On the debt side, Lu said the creditor community led by Japan, France and India, negotiated for months to find a formula to allow Sri Lanka to restructure its debt in a sustainable manner. “That formula put pressure on the Chinese to go along with those debt reassurances. That opened up IMF funding and changes in the economy you witness today.”

Lu also referred to the US Development Finance Corporation loans worth $553 million to develop a deep water shipping container terminal in the Port of Colombo, a project which has the Adani group as a key partner, as evidence of a loan that doesn’t balloon debt but a private sector investment for a profitable project.

In a hint at Chinese threats in the region, Lu said that a part of what Sri Lanka “really needs” was “for all of us to be there to support its sovereignty”. “One of the ways we are doing it from the US government is by providing patrol boats to the Sri Lankan military,” Lu said.

On the security front, he also referred to the Indo-Pacific maritime domain awareness initiative. “This is a complicated way of saying we are going to provide free, near real-time, commercial satellite data in countries around the region, including in South Asia, through the Indo Pacific Information Sharing Centre that Indians have created. This is going to be transformative and will help countries defend yourself against piracy, drug trafficking and illegal fishing”.

When asked about the friction in the region, Lu briefly referred to the India-China border conflict and the “historic, deep seated conflict” between India and Pakistan but said he spent a lot of time on the implications of the Myanmar situation on the South Asian region.

“I spend a lot of times on Bangladesh, the Rohingya refugees who are there and the effects of instability in Burma and what it means for the region,” Lu said, adding that US spent worked significantly with Bangladesh to support the generosity Dhaka has shown for over a million people who have been living in the country for years. “I had a chance to visit the Cox Bazaar, the biggest refugee camp in the world, to see the tremendous generosity but also the willingness of the international community to work together to find solutions to house these refugees until it is safe enough to go back.”

Lu said that the situation in Burma was not getting better and what worried him was that the refugee crisis and the security problems it was creating for Bangladesh and “potentially for India” could get deeper in coming days. “It is something we have to watch out for and enable our partners in the region, in this case Bangladesh and India, to cope with those stresses without it boiling over into instability in their countries as well.”

Responding to a question on how China has portrayed the administration’s Indo-Pacific strategy as directed against Beijing and how the US is managing this new world, Lu offered the example of Maldives.

“It is a place where China, US, India, lots of countries are competing for influence. The way we will prevail is by offering a better proposition…. my view is that China will be a good partner when there is genuine, actual competition. If there isn’t competition, what we have seen over and over again is China offering unsustainable debt for unsustainable projects”.

Pointing out that Maldives faces serious challenges including debt — if Maldives doesn’t get debt restructuring, it will owe more than $1.3 billion in debt payments, more than the government’s budget — Lu said that what US needed was “sustainable, profitable, private sector led investment” and pointed to economic opportunities.

Commenting on the security challenges the island chain faces, Lu said, “Maldives is a chain of 1200 islands, encompassing territorial waters of 53,000 kms, roughly the size of France. You think of Maldives as tiny. But it is actually enormous in terms of defence. How do you protect the sovereignty of a gigantic part of the Indian Ocean?” This can happen through “technology, training… real time commercial satellite data” as parts of the puzzle.

The US, he said, recently committed four patrol boats and is in discussion with aircrafts. “They are going to need that and more”. Lu also pointed to the climate challenges in Maldives and said it was on US and other friendly nations to provide technology and financing to ensure it is not submerged.

When asked about the Indian Ocean, Lu first acknowledged that there was an internal governmental challenge that the US faced was that the region was “cut into pieces” into different agencies and departments. “This makes coordination more challenging… It is tricky”.

Lu said that the US was a “big force” in the Indian Ocean region but India was a much “bigger force” in the region.

“If you are going to get this right, you have to work with Indians and make sure what we are doing is consistent with the direction they are moving in with respect to the Indian Ocean. They are historically the big player. So we are having interesting talks, including talks which will launch at the end of this month on Africa to think about how we are working together particularly in the littoral states of Africa that border Indian Ocean,” Lu said. (Hindustan Times)