Category: News

After Chinese Research Survey Vessel Shi Yan 6 completed its survey off the coast of Sri Lanka and reached Singapore on December 2, Beijing has asked permission from Colombo and Male to allow another Research Survey Vessel to dock at their ports and conduct a deep water exploration of South Indian Ocean from January 5 till late May, 2024.

While India has already raised objections with both Sri Lanka and Maldives and asked them not to allow the Chinese vessel to conduct exploration of Indian Ocean for future military operations, the vessel Xiang Yang Hong 03 is currently off the coast of Xiamen in South China Sea and will travel via Malacca to these countries after securing permission.

Made in 20126, Xiang Yang Hong 03 is a 4813 ton vessel equipped with latest survey and surveillance equipment and is registered at the port of Xiamen. The previous survey vessel, Shi Yan 6, which was allowed permission by Ranil Wickremesinghe government despite India’s strong objections exited Malacca Straits on November 20- after conducting exploration of Sri Lankan EEZ and South Indian Ocean. The ship was also seen 500 nautical miles off Chennai before it entered Colombo port on October 25, 2023.

The Indian concerns over Chinese ballistic missile trackers and Research Surveillance Ships being allowed by Sri Lanka and now with a pro-China government in Maldives are over Beijing using these vessels to spy on India in the name of marine exploration. Last year, Prime Minister Narendra Modi had raised the issue with visiting President Ranil Wickremesinghe on July 21, 2023 that Sri Lanka should respect strategic concerns of India.

With the PLA Navy rapidly acquiring maritime assets including three aircraft carriers, nuclear submarines and guided missile destroyers, China is expanding its footprint all over the Indian Ocean with a string of naval bases from Cambodia to Djibouti on the mouth of the Red Sea. China has already acquired/invested in ports in Cambodia, Myanmar, Sri Lanka, Pakistan, Iran and in UAE with an eye towards future naval operations.

In the name of marine exploration, Beijing is actually mapping the Indian Ocean bed from the ninety degree ridge south of Andamans and Nicobar Islands to the deep South Indian Ocean. Detailed ocean bed maps are prepared for future submarine operations all the way up to the coast of Africa. With the PLA already operating off the coast of Africa and the Gulf of Aden in the name of anti-piracy operations, it is only a matter of time that Chinese carrier strike forces will be patrolling in international waters of the Indian Ocean. Last month, the Chinese Navy conducted an exercise with the Pakistan Navy off the Makran Coast with a PLA Song class diesel hunter-killer submarine participating in specialized “sea bottoming” operations along with client state Pakistan.

Shishir Gupta is the author of Indian Mujahideen: The Enemy Within (2011, Hachette) and Himalayan Face-off: Chinese Assertion and Indian Riposte (2014, Hachette). Awarded K Subrahmanyam Prize for Strategic Studies in 2015 by Manohar Parrikar Institute for Defence Studies and Analyses (MP-IDSA) and the 2011 Ben Gurion Prize.

US Congressman Don Davis called on his colleagues “to recognize and address the ongoing oppression of the Tamil People” today, as he spoke out against genocide and called for “a permanent solution based on their right to self-determination” in the region.

Speaking at the US House of Representatives, Davis said “I stand with the Eelam Tamils in Sri Lanka”.

“Following the British departure in 1948, the unification of these kingdoms under a Sinhalese-dominated Sri Lanka led to the marginalization of the Tamil people,” he continued. “This process disregarded the Tamils’ right to self-determination.”

“State-sponsored discrimination and violence against Tamils sparked a tragic 30-year ethnic conflict, resulting in the 2009 Tamil Genocide.”

He went on to condemn the “recent arrests of Tamils for participating in peaceful events under the Prevention of Terrorism Act, ” which he labelled as “deeply troubling”.

The arrests of Tamils last month, as they attempted to commemorate Maaveerar Naal, sparked international condemnation.

“Therefore, I call upon my colleagues in Congress to recognize and address the ongoing oppression of the Tamil People,” Davis concluded.

“We must support a permanent solution that ensures stability and peace in this vital part of the Indo-Pacific. And we must honor our commitment to human rights and democracy.”

The Indian High Commissioner in Sri Lanka, Gopal Baglay, who practices diplomacy as a fine art, will be leaving Colombo soon for his next posting in Canberra after a very successful stint in which he won laurels as the man who coordinated with the Sri Lankan and Indian governments to deliver life saving vaccines during the pandemic and then vital assistance to the tune of US$ 4.5 billion to help Sri Lanka overcome an unprecedented economic crisis. Here is a video interview which Santosh Menon did with Mr.Baglay:

Russia has emerged as one of the strongest contenders to build nuclear power plants in Sri Lanka, according to a media report published on Tuesday.

According to the report, a high-level delegation from Russia recently visited the island nation and discussed proposed cooperation in the nuclear energy sector with the Sri Lankan authorities.

Sri Lanka currently imports most of its energy needs, including oil, coal and hydrocarbons. To ease the economic burden, the island nation aims to generate 70% of its electricity from renewable sources by 2030.

Chairman of the Sri Lanka Atomic Energy Authority (SLAEA) Prof. S.R.D. Rosa briefed the Russian delegation on the status of Moscow’s proposal to develop an offshore or onshore nuclear power plant in Sri Lanka.

He said his office had in principle given its approval for nuclear power to enhance Sri Lanka’s energy mix and it had been sent to the Ministry of Foreign Affairs for approval.

“We can implement this project only if the Intergovernmental Agreement (IGA) is signed between Sri Lanka and Russia. That is now pending,” he added.

Many countries, including the US, Denmark and China, have expressed interest in investing in nuclear power plants in the island nation after the SLAEA gave the green light to nuclear power.

Why Russia Is Foremost Contender?

Russia has taken a leading position in building nuclear power plants in South Asian countries. It has demonstrated its efficiency and understanding of the region by building plants in countries such as Bangladesh, China and India.

In addition, recently, Russia signed a memorandum with Burkina Faso, a country in West Africa, to construct a nuclear power plant.

Meanwhile, earlier speaking with Sputnik, Sergey Pikin, director of the Energy Development Fund, a Moscow-based think tank, said Russia can support them as it is also a supplier of technology, help them (Sri Lanka) while constructing the station, and with other requirements, including finances.

“I think the choice of Sri Lanka is obvious,” Pikin said, adding, “Russia is a global leader, and Colombo should move forward with Russia”.

In July, media reports quoted Wijesekera saying that Sri Lanka is assessing nuclear power plant offers from Russia and other countries.

Sri Lanka, a country of 22 million people, secured a $2.9 billion bailout loan from the International Monetary Fund to end its worst economic crisis since the end of colonial rule in 1948.

According to media reports, Sri Lanka’s electricity generation in 2020 was heavily reliant on fossil fuels (10 TWh) and hydropower (5 TWh), with small contributions from wind and solar. The CEB’s long-term energy plans include nuclear power from 2030.

In 2022, a team of IAEA experts assessed Sri Lanka’s readiness for a nuclear power programme through an Integrated Nuclear Infrastructure Review. This review was part of the IAEA’s Milestones Approach, designed for countries introducing nuclear energy.

The International Monetary Fund has asked for a recapitalization plan for the central bank after an extension of maturities of central bank held Treasuries to meet the lender’s gross financing need (GFN) targets led to valuation losses.

“The government needs to advance without delay the modalities of the CBSL recapitalization,” an IMF report issued after the latest review said.

“After assessing the impact of the DDO on the CBSL’s balance sheets, done in close consultation with external auditors and IMF staff and by applying good accounting standards and valuation frameworks, the government should stand ready to inject capital into the CBSL, as soon as fiscal buffers allow it, so as to reach positive equity from 2025, which would increase to 2 percent of GDP by 2031.”

Based on longstanding principles before inflation and peacetime currency collapses became routine from the last century with the defeat of sound money by state-run central banks running on Anglo-American post-Keynesian inflationist doctrine, note-issue banks typically bought 90 to 95 day bills, generally known as the ‘bills only policy’, analysts say.

The bills only reduces credit risks, interest rate risks and also liquidity risks at exit.

Sri Lanka’s central bank also usually buys Treasury bills to ‘print money’ and mis-target the policy rate and trigger currency crises, though rule had been partly broken during the post-war currency crises to mis-target gilt yields, critics have shown earlier.

When rates are corrected to stop the crisis, maturing bills are rolled over at a profit, and are easily sold down to the market, in the private credit collapse that follows, to rebuild foreign reserves, usually in a falling interest rate environment.

However, the re-structure of bills to meet gross financing needs target, with coupons lower than market, results in book losses to the central bank, which may turn into actual losses if the securities are sold at market rates.

“The swap of CBSL T-bills holdings for long-term T-bonds reduces the government’s near-term GFNs and refinancing risks at the cost of reducing CBSL capital,” the IMF report said.

“In estimating the capital impact, staff cautioned against valuing the T-bonds using a discount rate that is disconnected from the current market yield curve (such as the theoretical risk-free discount rate).

“To avoid undesirable implications such as weaker demand for CBSL liabilities (e.g., cash in circulation), higher inflation risk premia, and rising dollarization risks, which could ultimately undermine CBSL independence and effectiveness of monetary policy, staff emphasized the urgency of recapitalizing the CBSL.”

According to published data the central bank has re-stated its September balance sheet.

The monetary authority was initially sitting on large profits with equity of 723 billion rupees in August which was reduced to 493 billion rupees by September.

Related Sri Lanka central bank makes Rs234bn loss in Sept amid DDR

The number was later re-stated at 72 billion rupees.

The IMF report said a buffer of 0.5 percent GDP has been reserved for the recapitalization of the central bank in 2024 which was assessed “as sufficient to bring CBSL equity to positive levels based on IMF staff’s estimate of CBSL’s NPV loss from DDO and its equity position at the time of bond exchange in September 2023.”

A soft-pegged or flexible exchange rate central bank earns interest on its domestic assets as well as foreign reserves.

Under the old monetary law, the central bank was barred from transferring profits if it acquired large holdings of bills to trigger instability.