Petroleum Deal with India to Ruin Lankan Economy, Cause Massive Unemployment and Turn It into another Ukraine
May 9th, 2017Dilrook Kannangara
Deception is used again to get the India petroleum deal passed. Leasing or selling Trincomalee oil tanks is not the issue; ruining Lanka’s petroleum industry and making it dependent on India is the real deal. It will be an all round disaster with far-reaching consequences including war, riots and economic ruin. The deal must not be signed. If it goes ahead, it must be abrogated by a future government.
Economic Ruin
Petroleum retail market of the island is worth over $1 billion. At present Indian LIOC company has a 18% market share. CPC’s market share is 82%. With the proposed deal, the entire market will go to Indian companies. Local refineries also add value to the petroleum industry now. This too will be lost costing another $1 billion. Under the deal, oil refinery operations will be done in Andra Pradesh and refined petroleum will be distributed in Nepal, Sri Lanka, Bangladesh and Bhutan monopolizing their petroleum industry.
Indian petroleum hub in Andra Pradesh will be making all the profit from exports.
This is a profitable industry that keeps making profit despite neglect by successive governments. With the deal, all economic worth of the industry will go to India. It will worsen Lanka’s balance of payment by $2 billion annually. This has to be borrowed to bridge the balance of payment gap adding more interest cost and worsening the debt crisis.
Tens of thousands of CPC employees will be unemployed as the CPC will be routed economically. Indians will be holding all senior positions of LIOC and other Indian firms that replace CPC. Very few locals will be employed at managerial levels. All material cost, machinery cost, senior management cost, service cost, profit and management fees will go to India. Direct and indirect suppliers of CPC and banks will also suffer enormously. Economic ripple effects will be enormous. This is why most developing countries have state ownership of the petroleum industry.
Dangerous Energy Dependency on India
Most concerning is dangerous energy dependency on India. Energy is crucial to national security and the national economy. Petroleum is the largest power and energy source of the island nation. After the deal, within a few years, Sri Lanka will be at the mercy of India for its energy. India will use energy as a weapon to negotiate with Lanka on all matters of its choosing.
Pricing of petroleum and its dependents including electricity will be determined by India without regard to Lanka’s national policy. At present (apart from election gimmicks), the Lankan government manages pricing of kerosene, petrol, diesel and gas to stimulate the economy. This ability will be lost. India will be manipulating the economy and even elections using petroleum pricing as a tool. Increase in petroleum prices increases the cost and price of all goods and services!
In 1952 when the country was facing a serious food crisis, the government entered into the rubber-rice pact with China. Western governments vehemently opposed it and their petroleum companies threatened not to fuel ships involved in importing rice to the island and exporting rubber from the island. Prime Minister Kothalawala’s treasury secretary in turn warned against such action pointing out the likelihood of nationalization of oil companies. Fearful of repercussions, oil companies toed the line. However, given the strategic national importance, Prime Minister Sirima Bandaranaike nationalized them in 1963. It added an enormous value to the national economy and saved billions of dollars over the years in foreign exchange.
Trincomalee Turned into Crimea and Sri Lanka to Ukraine
Indians landing in Trincomalee can be equated to the Russian invasion and occupation of Crimea. In fact, it is far worse. Russia has some historical claims to Crimea but India has no historical claims to Trincomalee. Thereafter Sri Lanka will be turned into another Ukraine of total dependence and conflict.
Ukraine has two main ethnic groups – ethnic Ukrainians (native to Ukraine) and Russians (the largest minority). Largest group in Eastern Ukraine is the ethnic Russian minority. Russia has traditionally used the Russian minority to pull strings on Ukraine. In 2013, following the unconstitutional removal of the pro-Russian Ukrainian president (after a series of corruption allegations), a pro-western government was elected which decided to join the EU. As a sovereign nation, Ukraine has the right to come to any agreement with any country or organization. It is not Russia’s business to interfere. However, Russia interfered and invaded Ukraine grabbing strategically important Crimea including its ports. Russia also armed Eastern Ukraine Russian minority separatists to wage a war on Ukraine for separation. Civil war has ruined the economy of Ukraine. Today it is a de facto divided country along ethic divisions.
Ukraine also depends on Russia for gas for energy needs. Russia continuously exploits Ukraine’s energy dependency.
These events must ring a bell because this is exactly what is happening in Sri Lanka!
Accompanying the deal is an Indian project to link Mannar, Vavuniya and Trincomalee. North to this axis is Tamil-only. In 1970s and 1980s, India financed and armed Tamil terrorists that fought unsuccessfully against Sri Lanka to create a Tamil-only nation within the island. Sri Lanka relied on India’s rivals – China and Pakistan – for weapons to defeat the terrorist group in 2009. With the petroleum deal, Sri Lankan territory north of the axis will become the equal of Eastern Ukraine. Sri Lanka will have to contain Chinese economic deals. Otherwise, India will use the split to create havoc in Sri Lanka once again.
Just as Russia manipulated Ukraine out of the EU, India will force Lanka out of China’s Silk Road initiative.
Hambantota Port Becomes Unprofitable
Most profitable, rather the only profitable business line of Hambantota port is its bunkering facility. However, when India monopolizes petroleum industry in the island, Sri Lanka will be unable to sell fuel in Hambantota. India will price fuel high enough to make it unprofitable. Trincomalee will become the choice of refueling for a limited number of ships. With its most profitable line of business gone, Hambantota will automatically become an economic burden. China will either leave Hambantota or scale down its economic imprint. India will achieve its desired outcome without a war. Deprived of another vital economic asset, Lanka will reel in underdevelopment.
Tamil Eelam on Wings
Just as Donbas rebels assert Independence, Tamil separatists will assert Independence in the north. Trincomalee as the vital petroleum entry and storage point of the island, Tamils will make further extortionist demands. If Sri Lanka doesn’t cave in, Tamils will assert Independence which will disrupt petroleum movement. If Independence is reached, Sri Lanka will have to depend on Tamil Eelam for all petroleum and will pay a higher price as a mark-up. South Sudan and North Sudan are in a similar situation. South Sudan relies on North Sudan (its rival) to export crude at which point the North imposes various disruptions.
Sri Lanka will end up as Ukraine, Sudan or worse.
Conclusion
It is imperative that a future government nationalize all petroleum assets in the country once again. Otherwise, it will be the end of the island nation as we know it. Never-ending war, riots and disruptions will become the norm just as in Ukraine and Sudan. However, trying to nationalize them will not go without severe Indian pressure including possibly another military intervention. As executive presidents of the island nation lack the courage for bold action its prime ministers of the past had, nationalization threat will remain confined to election platforms.
It will be a new dilemma for the island torn along ethnic lines. Hidden in metaphorical small print of the deal is another Indian instigated war in the island. Other smaller neighbors of India will also become victims of India’s new petroleum hegemony.



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