President Rajapaksa with Russian Foreign Minister S Lavrov
With the country grinding to a halt because fuel has run out, and there are no dollars to pay for fresh consignments, Sri Lanka has approached Russia for urgent supplies, even braving US censure.
In an act of extreme desperation, the Sri Lankan government announced the visit of two ministers to Russia to fetch oil, even as a team of top US officials was in Colombo discussing with the government what the US could do to pull the Lankan economy out of the woods.
Another report said that Sri Lanka will team with India to buy Russian oil at a concessional rate. India’s brazen defiance of US sanctions to buy oil from Russia has encouraged Sri Lanka to team with India. The Lankan media further said that President Gotabaya Rajapaksa had written to the Russian President Vladimir Putin seeking help.
Lanka’s nationalist parties have also been wanting the government to approach Russia as Russia has been a “friend in need” in the UN Human Rights Council whenever Sri Lanka was pilloried for alleged war crimes by the Western nations. Russia had also sold military equipment to Sri Lanka during the war against Tamil separatists when the West refused to sell arms.
Currently isolated and subjected to vicious economic onslaughts by the US and NATO for attacking Ukraine, Russia needs the support of Sri Lanka. Russia appears keen to help with oil supplies. In May, Sri Lanka bought a 90,000-metric ton shipment of Russian crude to restart its only refinery.
Lankans are nostalgic about the friendship that prevailed between the two countries in the Soviet-Sirimavo Bandaranaike era and want the bonhomie to be revived. In an April 2022 paper, Sohan Fernando of the Plekhanov Russian Academy of Economics, recalls that the 1958 Trade and Technical Cooperation Agreement paved the way for the first FDI from the Soviet Union in Sri Lanka. The USSR was the first to support Sri Lanka‘s industrialization plan.
Sohan Fernando and former UN official Somar Wijedasa point out that in 1962, the USSR provided grants to establish the Ceylon Steel Corporation in Oruwala with a capacity of 50,000 tons per year. Also, the Ceylon Tyre Corporation and the Sugar Corporation were established with the support of the USSR. It assisted the development of the Mahaweli and Udawalawe projects; gave long-term credit on favourable terms; and the gifted the ship Samudradevi in 1976. There were agreements on air transport and fisheries. In 1976, the Soviets gifted the massive bronze statue of the late SWRD. Bandaranaike that stands facing Galle Face Green, Somar Wijedasa recalls. The Moscow-educated Sri Lankan also points out thousands of Lankan young persons had got priceless opportunities to do higher level studies in top Soviet institutions.
After liberalization of the Sri Lankan economy in 1978, and the turning back on socialism, relations with the USSR took a backseat and relations with the West held center stage. The relationship with Russia suffered a further setback when the Soviet Union collapsed in 1991. But with Putin coming to the fore in 2000, Russia began to build itself as a power and became assertive in international relations. However, Sri Lanka failed to cultivate Russia till the anti-West Mahinda Rajapaksa became President and was followed by President Maithripala Sirisena, who was a Russian acolyte.
But economic relations were still stunted because Russian businessmen were eying the prosperous West and not undeveloped Sri Lanka. The Russian State also did not entertain global strategic ambitions. But with alienation from Europe, Russia is turning East and towards countries like Sri Lanka.
Russia has been having a small presence base in Sri Lanka. In 2020, Russia was the largest importer of Sri Lankan tea, buying US$ 142.3 million worth of the leaf, which was 34.53% of its overall tea imports. In terms of tourist arrivals in Sri Lanka, Russians were the second largest group with 16, 894 arriving in 2021.
Around 45% of Sri Lanka’s wheat imports are from Russia and Ukraine combined. Russia is also a significant source for the import of asbestos, iron and steel, copper (cathodes), and potassium chloride for fertilizer.
But the US sanctions have made imports from Russia difficult and expensive. To get round the US financial sanctions, Sohan Fernando suggests Lankan Rupee-Rouble trade. Russian tourists should be able to pay in Roubles and these could be used to import goods from Russia, he says. Sri Lanka should team up with India to increase flights to Russia to generate revenue from Russian tourism. Options like Union Pay is gaining a lot of traction as Visa and Master Card systems have been banned in Russia. Sri Lankan banks have started to accept Union Pay as a major payment gateway for transactions between Russia and Sri Lanka, Fernando says. Russia, India and China could unite under BRICS to mitigate US dollar-domination of global market, he suggests.
Somar Wijedasa recalls that former Russian Ambassador Alexander Karchava had proposed that the Russian company Gazprom participate in gas exploration and modernization of Lanka’s oil refining facilities. He proposed that Russian help be sought to develop the fisheries industry and the construction of hotels and sea ports. Alas, these suggestions were not taken by Lankan rulers who preferred to stick to the beaten track.
Sometimes, Sri Lankan State structures have worked at cross purposes and in some cases these have caused a diplomatic flutter. Recently, an Aeroflot flight with 191 passengers on board was detained at the last minute because of a court order which was illegally delivered to the airport authorities. The detention was for alleged breach of an agreement with the Irish lessor of the aircraft. This happened even though there was an agreement with the Sri Lankan government to allow Aeroflot to operate flights from Colombo unhindered. There were no other issues. The Sri Lankan government intervened to release the aircraft only after the Russian Foreign Office said that the incident would jeopardize bilateral relations.
