India and the United Arab Emirates have reached an agreement to establish an energy hub in Sri Lanka, as announced by India’s foreign ministry on Saturday. This development comes amid increasing competition between New Delhi and Beijing in the Indian Ocean region.
The agreement for the energy hub was signed during Indian Prime Minister Narendra Modi’s visit to Sri Lanka, marking the first visit by a foreign leader since President Anura Kumara Dissanayake took office in September.
India and Sri Lanka have been strengthening their relationship as the latter recovers from a significant financial crisis that began in 2022, during which India extended $4 billion in financial support.
This new agreement enhances New Delhi’s competitive stance against China, which has seen its state-owned energy company, Sinopec, secure a contract to construct a $3.2 billion oil refinery in Hambantota, a port city in southern Sri Lanka.
The energy hub will be located in Trincomalee, a strategically significant natural harbor on Sri Lanka’s eastern coast. It will involve the development of a multi-product pipeline and may utilize a World War II-era tank farm, partially owned by the Sri Lankan branch of Indian Oil Corporation, as explained by Indian Foreign Secretary Vikram Misri during a press briefing in Colombo.
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“The UAE is a key strategic partner for India in the energy sector, making it an ideal collaborator for this unprecedented initiative in the region,” Misri stated. “The specifics of the UAE’s involvement will be clarified once business-to-business discussions commence.”
The three nations will soon select business entities to evaluate the financing and feasibility of the projects associated with the hub, he added.
Additionally, Modi launched a $100 million solar power initiative, a collaboration between the Ceylon Electricity Board and India’s National Thermal Power Corporation.
India and Sri Lanka have also finalized their debt restructuring process, with Sri Lanka reportedly owing approximately $1.36 billion to the EXIM Bank of India and the State Bank of India, according to data from the Sri Lankan Finance Ministry.
Colombo initiated discussions on debt restructuring following its default in May 2022, reaching a preliminary agreement with bilateral creditors Japan, India, and China in June of the same year.
Additionally, India and Sri Lanka established agreements concerning power grid connectivity, digitalization, security, and healthcare.
