by C.A.Chandraprema  Courtesy The Island

July 29, 2017, 7:13 pm

The signing of the Agreement with China Merchant Co to lease out the Hambantota port for 99 years went ahead on Saturday as scheduled. This announcement took place in the context of rumours that were swirling around that India had brought pressure on Sri Lanka to postpone the signing of the agreement. The fact that this agreement was signed yesterday is arguably the biggest foreign policy debacle that India has faced since that country gained independence from the British. Through this agreement that was just signed, China gains control of a complete free port in Hambantota with a 5,000 acre industrial park. The area that China gains control over is far bigger than independent states like Vatican city and Monaco, many times the size of Gibraltar, at least the the size of the Cocos Islands and nearly the size of Macau. What more would the Chinese need in terms of a foothold in the Indian Ocean?

From the time the Sri Lankan cabinet gave the go ahead for the revised agreement last Tuesday, anxious articles have been appearing in the Indian press. An article in the Financial Times (India) stated erroneously that the “Hambantota International Port Services Company”, which will control the sensitive aspects of the port operations including security, will be 50.7%  owned by the Sri Lankan government, while China Merchant Port Holdings will have 49.3%. If Indian fears had been allayed by the impression conveyed to them by someone that the Sri Lankan government will have a controlling interest in the company that handles the security of the Hambantota Port in terms of the agreement that was signed, then they have been deliberately misled.

Only 42% of the Hambantota International Port Services Co which will handle port security will belong to the Sri Lanka Ports Authority and 49.3% will belong to the China Merchant Co. The remaining 8.7% will belong to the “Hambantota International Port Group Co” which is 85% owned by the China Merchant Co. Thus it is China that has the controlling interest in the Company that is in charge of handling port security as well. In any case, even if Sri Lanka did have a controlling interest in the Hambantota Port Services Company which will handle the security aspects of the Hambantota port, that would not result in the Chinese being prohibited from bringing any kind of ship it likes into Hambantota. Sri Lanka is too small and too insignificant to be able to prevent a country like China from bringing anything they like into the Hambantota port. Besides, whatever the Chinese brings into Hambantota may be a security risk to India but poses no risk to Sri Lanka.

Chinese war material in Sri Lanka will pose a threat to Sri Lanka only if there is an all out war between India and China which however is not very likely. From inquiries made, it appears that the Indians have basically thrown in the towel and accepted the inevitable. The Indians may have hypnotized themselves into believing that the Chinese will not be able to bring in whatever they want to Hambantota due to the provisions relating to the security of the port that have been written into the agreement. Most important in this regard is section 2B of the agreement which goes under the title ‘Restrictions on Operating Rights of HIPG operator and CUF operator. (HIPG and CUF are the acronyms used for the two companies that are to be formed to control various aspects of the port’s operations.) the contents of Section 2B of the Agreement are as follows:

Provisions against military activity in Hambantota

2B.1 It is expressly understood and agreed by the HIPG Operator and the CUF Operator that the use of the port property and the Common User Facilities shall be for the purposes of port and marine- related commercial and development activities and the HIPG Operator and the CUF Operator are strictly prohibited from using port property for any non-port or non-marine related commercial activities or activities involving military personnel and activities of military nature whatsoever, whether on land, in air, or in sea, onshore or offshore within the territory of Sri Lanka, and the GOSL shall have the sole power and be the sole authority over such activities.

2B.2 For clarity, it is further agreed and understood by the HIPG Operator and the CUF Operator that the sole authority for granting all requisite permissions, clearances and approvals for (i) bringing in, or berthing warships, submarines: or (ii) storing or warehousing of any military equipment and machinery; or (iii) installation of communication networks/facilities for military purposes, or (iv) any matter connected or incidental to the aforesaid Clause 2B. I, shall only be with the GOSL.

In addition to the above, there is Section 27 of the Agreement under the title ‘Security and Safety’ which sets up a mechanism to oversee security within and outside the port property, which goes as follows: 27.1 The Ministry of Ports and Shipping shall constitute and set up an Oversight Committee, convened by the Ports Authority consisting of representatives of the Sri Lanka Navy, Sri Lanka Police, and the Secretary of the Ministry of Defense or his authorized representative for managing the security within and outside the Port Property and the Lease Area.

27.2 The national security of the Port Property shall be controlled by such Oversight Committee. However, the CUF Operator shall be responsible for the provision and maintenance of perimeter fencing around the Lease Area and for all internal security within the Port Property, to maintain the proper conduct of its business, the safety of the cargo, Vessels, and the personnel, including but not limited to manning of the entry/exit gates, in compliance with the ISPS Code and any Applicable Law, and subject to Clause 2, who will be guided and monitored by, and work in close coordination with the said Oversight Committee so appointed. The personnel deployed for security matters within the Port (externally and internally), shall be exclusively Sri Lankan nationals. 27.3 The members of the Oversight Committee and any other nominee of GOSL shall at all times have access to the port property with notice to the HIPG Operator.

Onus placed on Sri Lanka

Any breach of Section 2B or Section 27.2 will qualify as a ‘Major Breach’ of the Agreement under Section 33(e). According to Section 37.1(a) if a major breach occurs, the aggrieved party can request immediate remedy of the major breach or exercise the option of issuing a termination notice. According to Section 37.2(a) & (b), in the event of any Major Breach by any party, the party suffering any such Major Breach may give the other party time to remedy the breach and if no remedy is effected, they have the option of issuing notice to terminate the Agreement. What is meant by remedying a major breach in terms of the matter under discussion here would be if a Chinese nuclear submarine happens to wander into the Hambantota harbour, the Sri Lankan government can ask the Chinese port operator to ‘remedy’ the situation by asking it to leave. There are no penalties if a breach occurs but is soon corrected.

The wording of these particular sections seem to indicate that on the rare occasions when Chinese warships or submarines need to enter a harbour, they can nip into Hambantota and leave after apologizing for their presence with no major damage done to the Agreement. According to Section 43.5, if this Agreement is terminated due to a Major Breach on the part of the HIPG Operator, in such event, the HIPG Operator shall have the obligation to transfer all the shares of the HIPG Operator, held by China to the Port Authority free of any payment whatsoever.

All these elaborate provisions regarding the military use of the Hambantota harbour have obviously been included in the Agreement, to satisfy India. Sri Lanka for its part has no interest in placing any restrictions on the Chinese bringing in military vessels into Hambantota. Quite on the contrary we should be actively encouraging them to bring as many military vessels into Sri lanka as possible and if possible take up permanent station here so as to counterbalance India! J.R.Jayewardene once wrote that the reason why D.S.Senanayeke retained the British military bases in Katunayake and Trincomalee was as a deterrent to India.  If such was the case then, today, Sri Lanka has even greater reason to want to counter-balance India. It will be noticed that according to all the provisions in the Hambantota Port Agreement mentioned above, Sri Lanka is supposed to police itself when it comes to the military use of the Hambantota harbor.

No Sri Lankan has any interest at all in preventing the Chinese from using the Hambantota harbor for military purposes. Apart from the need to counterbalance India, there is the other consideration that military use also means money. If the Chinese military was going to bring business to the Hambantota harbour, who is the Sri Lankan who would want to prevent that? If the Indians complain that there are Chinese warships in Hambantota, the Sri Lankan side is likely to say “Chinese warship? We never saw any Chinese warship!” (This is a country where the Police spokesman blandly says that even though there is video footage of thugs armed with clubs attacking CPC strikers in the presence of police officers, that the police need a complaint to begin an investigation to see whether such an assault actually took place.)

The Chinese company taking the Hambantota port on lease should for its part, be daft not to cash in on Chinese military spending by using the Hambantota harbor to provide fuel, water and food to all the Chinese military vessels in international waters in the Indian Ocean. There is nothing in the agreement against the harbor being used as a supply base to refuel or re-provision Chinese military vessels in mid-sea. If a Chinese warship or submarine gets into trouble and needs to come into the Hambantota harbor for repairs, that will qualify as a humanitarian rescue mission not as military use.

Indians hoist with their own petard

Furthermore, we did not see any provisions in the Hambantota agreement with regard to the use of armed sea marshals on board ships. Most civilian shipping in the Indian Ocean has armed guards called sea marshals on board. So far as this writer can remember, the International Maritime Organization which has issued directives from time to time regulating the use of sea marshals has not placed any restrictions on the kind of weapons that sea marshals can use provided they have the requisite training to use those weapons. Most of the time the sea marshals on board civilian shipping may be privately contracted security personnel. But some countries hire out their military personnel to private shipping companies to act as sea marshals. Not so long ago, there was a major showdown between India and Italy when two Italian soldiers serving as sea marshals on board a merchant vessel opened fire on some Indian fishermen thinking they were pirates and killed one fisherman.

Sri Lanka also now has naval ratings serving as sea marshals on board merchant vessels. Even the Chinese tuna trawlers in the Indian Ocean had Sri Lankan sea marshals hired from Avant Guard Maritime Services. Hence every Chinese merchant vessel calling at the Hambantota port could be crawling with Chinese soldiers wearing the hat of a sea marshal. There is no restriction on the number of sea marshals that a ship can have or the kind of weapons they can use. Besides the protocols developed by the International Maritime Organization and other bodies like the UN Security Council require all nations particularly around the Indian Ocean to provide facilities to these sea marshals. There is nothing to say that a sea marshal has to be below a certain rank. Even a Chinese General or Admiral could come to Sri Lanka wearing the label of a sea marshal and he will have to be welcomed in Hambantota not just by the Chinese company running it but by the Sri Lankan government as well.

For all these reasons put together, the provisions on the Hambantota agreement preventing the use of the Hambantota harbour for military purposes will in practice be a dead letter. The Chinese are here to stay and basically to do just as they please and the Indians can do nothing to stop it. This is arguably India’s worst foreign policy debacle in its post-independence history particularly because the Chinese have now got a permanent base in the Indian Ocean under a government that was brought into power by a special operation launched by RAW. India’s present National Security Advisor Ajit Doval is known as a field operator. One of his exploits in the 1980s was wearing a loin-cloth and pretending to be a rickshaw puller to gather information about the Sikh extremists holed up in the Golden Temple. There is a big difference between performing that kind of exploit and state craft and India’s regime change misadventure in Sri Lanka proves it.

In 2014, soon after assuming power, Ajit Doval was arrogantly telling Sri Lankan’s then Defence Secretary Gotabhaya Rajapaksa that the Colombo Port City project should be stopped because it poses a threat to India. At that time there was no talk of giving the Hambantota Port to the Chinese. The main reason why the Indians decided to get rid of the Rajapaksas was because a Chinese submarine was allowed to dock at the Colombo harbour. For a few heady months, after January 2015, it appeared as if the Indians had won the day with the new government stopping not just the Colombo Port City project but all Chinese funded projects in Sri Lanka. Now however, the very government that the Indians helped bring into power has not only restarted the Colombo Port City project but also given the Hambantota port to the Chinese on a 99-year lease.

China’s unexpected bonanza

If India thought that their security was endangered because of the influence that the Chinese had during the Rajapaksa government, now India has practically no security. Even India’s domestic shipping going from the west coast to the east coast has to go around Sri Lanka passing Hambantota which has now become a Chinese controlled free port. Some years ago, there was much interest in India in the Sethusamudram project which aimed at dredging a shipping route through the Palk Straits so that Indian domestic shipping would be able to go from the west coast to the east coast of India without having to circumnavigate Sri Lanka. Now however, even reviving the Sethusamudram project will not help because Indian shipping using the Palk Straits will have to pass the Port City where the Chinese have a significant stake.

What then is the alternative available to India to be able to move around without being watched by China? One alternative would be to build the Hanuman bridge to Mannar in Sri Lanka so that instead of having to ship their goods past two Chinese enclaves in the Indian ocean, trains could be used to haul goods across the Palk Straits to Mannar and from there onwards to Trincomalee along the track that the Indians themselves have pledged to build, to be transported to east coast ports in India by ship. But any such trans-shipment may be financially unviable for India. With China herself on the northern border,  Pakistan in the West and now the Hambantota free port in the South, India is well and truly encircled and all this happened because of Narendra Modi’s and Ajit Doval’s political miscalculation in Sri Lanka. The Chinese government would not have imagined even in their wildest dreams that they would be able to achieve this so soon.

What they would have had under the Rajapaksa government was at most a friendly and cooperative government. The Rajapaksas were on principle against privatization and they would never have gone so far as to lease the Hambantota port to a Chinese company for 99 years. The Rajapaksa government had in fact signed a Supply Operate and Transfer (SOT) management contract with a joint venture between China Harbour Co and China Merchant Co to supply equipment such as cranes and operate the Hambantota container terminal for 40 years on very favourable terms. Under this arrangement, the industrial zone and the harbor would have been controlled by the Ports Authority while harbor operations would have been handled by the private sector as is the case now in the Colombo port. That was as far as the Rajapaksa government would have gone.

In fact it is obvious that the Chinese never expected to get the Hambantota harbor on a 99 year lease even from the yahapalana government. When the present government called for bids for the lease of the Hambantota port, two Chinese Companies put in bids – China Merchant Co for 99 years on payment of USD 1.12 billion and China Harbor Co for 50 years with a payment of USD 750 million. The latter bidder had also agreed to pay various harbor charges giving the Ports Authority a much better income than the China Merchant Co even though the up front payment by China Merchant Co was higher because of the much longer duration of the lease. On a year by year basis, the more favorable offer was clearly the China Harbour bid and that was what the Chinese would have expected the government to accept. Yet probably much to the surprise of the Chinese authorities themselves, the government accepted the 99 year bid.

It should be noted that that Chinese never shortchanged Sri Lanka. They gave us a choice between a good bid and a bad one and our government chose the bad one. What can the Chinese do about that other than thanking their lucky stars and RAW for having put this government in power so that they could complete their encirclement of India decades sooner than they thought it would be possible. Hambantota will give the Chinese the ability to supervise the sea lanes in the Indian Ocean right up to the South Pole and it has brought them that much closer to overtaking the India-West axis as a world power. July 29, 1987 was the date that the Indo-Lanka Accord was signed by JRJ under duress. Three decades later to the day, on July 29, 2017, a government of his nephew Ranil Wickremesinghe signed the Hambantota Port Agreement with China. Perhaps one could argue that this was to reduce India’s influence on Sri Lanka.

In any event, what took place in Colombo yesterday, is a total debacle for India. Even obtaining control over the Trincomalee harbor means nothing because all Indian ships calling over at Trincomalee will have to go past the Chinese free port in Hambantota. A couple of centuries ago, Trincomalee may have been the strategically important port but today, it’s Hambantota.