China’s state-owned oil giant settles in Sri Lanka for 20 years

China’s state-owned oil company Sinopec on Monday signed an agreement with the government of Sri Lanka that will allow it to operate in the impoverished island nation for the next 20 years.

The Chinese state propaganda organ world times reported on Tuesday that the deal will allow Sinopec to “import, store, distribute and sell petroleum products” across the country. Sinopec will have access to the 150 existing service stations for petrol and diesel and, in the long term of the contract, will have the right to build 50 more. The company must begin operations within 50 days of Monday.

Sri Lanka is one of the most financially distressed countries in the world due to its crippling debt, exacerbated by its entry into China’s Belt and Road Initiative (BRI). Once heavily dependent on Chinese tourism, Sri Lanka has lost a vital source of income during the Communist Party’s onerous shutdowns at home, a response to the Wuhan coronavirus pandemic which began in early 2020 and has not officially ended. only ended in December following nationwide protests in China. .

However, socialist mismanagement and the predatory nature of its BRI loans had already begun to devastate Sri Lanka before its pandemic-induced collapse of its economy in mid-2022. Critically, in 2017 the Sri Lankan government was forced to cede control of its critical port of Hambantota to China. In 2021, Colombo discovered that the deal he had signed gave China control of the port for nearly 200 years, not just the 99 years he had believed the deal would originally work for.

Technicians work at the Fuling shale gas field of China Petroleum and Chemical Corp (Sinopec) on October 8, 2021 in Chongqing, China. (Luo Bin/VCG via Getty Images)

Other BRI projects stalled, Sri Lanka DailyMirror reported on Tuesday, due to a “serious lack of enthusiasm on the Colombo side and the absence of committed, competent and goal-oriented bureaucrats for a long period to undertake follow-up actions”, according to unnamed sources. . The newspaper said its sources described Chinese businessmen as frustrated by suspicions that local Sri Lankan officials want bribes to carry out BRI projects.

Current President Ranil Wickremesinghe, then Prime Minister, announced in June 2022 that Sri Lanka’s economy had “completely collapsed”.

“We are now facing a much more serious situation beyond just shortages of fuel, gas, electricity and food. Our economy has completely collapsed,” Wickremesinghe proclaimed in a speech to parliament. “This is the most serious problem we face today.”

Sri Lanka ran out of foreign currency to buy these basic needs, leaving citizens without access to basic foodstuffs, medicine or petrol last year. Foreign businesses refused to accept Sri Lanka’s virtually extinct currency. As Sri Lanka is a socialist government, no private company was equipped to fill the void left when the government ran out of money to import these goods. Colombo instead imposed rations, leading to hours-long queues for the little petrol and diesel available in the country. Several people died waiting for gasoline on these lines, exhausted from the heat and thirst.

To deal with fuel shortages, Wickremesinghe’s government announced that it would end restrictions on international oil companies operating in the country. Prior to this change, only Sri Lankan state-owned companies, Ceylon Petroleum Corporation (CPC) and Lanka Indian Oil Company (LIOC), could process and sell petroleum fuels in the country. As state entities, these companies also did not have enough foreign exchange to In April, the government announced that it would begin the process of welcoming oil companies from Australia, China and America to Sri Lankan markets, paving the way for Sinopec.

The Chinese world times noted in his coverage of the Sinopec deal that allowing foreign oil companies to operate within Sri Lanka’s socialist structure naturally injects foreign currency into the country, overrides the Sri Lankan government’s lack of access to foreign currency foreign countries and therefore to foreign markets.

“Sinopec is a state-owned enterprise in China, which has great advantages in oil resource allocation, infrastructure and financial support,” said an “expert” approved by the Chinese regime. world times. “As the company is able to use its own funds for the purchase of fuel, entry into the Sri Lankan oil market will protect local oil supplies and reduce Sri Lanka’s foreign exchange problems.”

Sinopec got its first, but talks would continue with other companies. At the end of April, the DailyMirror reported that Energy and Power Minister Kanchana Wijesekera announced talks with United Petroleum of Australia for business in the country. The American company Shell is also working on a project to sell its oil in Sri Lanka.

While the foreign exchange situation remains dire, then-President Gotabaya Rajapaksa, who fled the country in July and left Wickremesinghe in power long ago, has slightly improved the economic landscape. Rajapaksa, one of nearly two dozen members of his family holding government posts just two years ago, fled after angry mobs began burning down the homes of senior government officials, including Wickremesinghe’s house and that of Rajapaksa’s brother, former President Mahinda Rajapaksa. The mob attacks ended with mobs occupying the presidential estate and hosting a pool party.

After Rajapaksa, Wickremesinghe decided to crush the protests using the Sri Lankan military and convince international financial institutions to bail out Sri Lanka. In March, the International Monetary Fund (IMF) agreed to grant Sri Lanka a $3 billion loan, conditional on Sri Lanka restructuring its debt.

The IMF sent a team to the country this week for a mission to assess the current financial situation.

“The timely conclusion of restructuring agreements with creditors in line with program objectives at the time of the first review is essential to restore debt sustainability,” the IMF said in a statement after its mission. in Sri Lanka. “Maintaining reform momentum and ensuring timely implementation of program commitments, including to ensure central bank independence, improve governance and protect the vulnerable, are essential for Sri Lanka to emerge from economic crisis”.

“Exactly a year ago, Sri Lanka was in the midst of an economic and political crisis with an unprecedented fall in the exchange rate leading to days and miles of queues for fuel and cooking gas and prices having tripled, compared to that of the previous year”, DailyMirror noted in an editorial in early May. “However, there are no such queues now, no unrest of farmers in rural areas or any other groups on the streets in urban areas.”

“Does that mean Sri Lanka is now off the hook? asked the newspaper, concluding in a grim tone: “Clearly, we are not off the hook. We are not repaying our debts, nor are we spending foreign currency on imports as we did before in order to save them for immediate and more essential needs.

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