Trincomalee – a strategically-located port city on the east coast of Sri Lanka – has ambition to transform into an energy hub under a three-way deal signed between India, Sri Lanka and the United Arab Emirates. The agreement reportedly sets out a “framework for collaboration on a range of infrastructure and energy projects”, which includes the construction of a pipeline between India and Sri Lanka. According to the Emirates News Agency, the agreement also includes the “possible development” of a new refinery project.
Sri Lanka’s energy sector has become a political battlefield for external powers, primarily India and China. A proposed $3.7 billion oil refinery in Hambantota, located along Sri Lanka’s southern coast, recently announced by Chinese company Sinopec sparked concern in New Delhi, which has been particularly sensitive to Chinese presence in Sri Lanka’s northern and eastern provinces, given their proximity to India. When completed, the Hambantota facility will become Sinopec’s first fully controlled overseas refinery.
A lot remains unknown about the nature and scope of the projects under the Trincomalee agreement, especially about the nature of UAE’s involvement. A special briefing by the Indian Ministry of External Affairs only outlines the “broad terms of reference” for trilateral cooperation, with the next step business-to-business discussions. Notably, while the Emirates agency reports that the project will include “refurbishing and developing” the Trincomalee Tank Farm – a Second World War era tank farm partly owned by a local subsidiary of Indian Oil Corp – Indian Foreign Secretary Vikram Misri, while speaking with journalists in Colombo, said the agreement may include the project.
By securing the deal in Trincomalee – which is likely to be much more modest compared to Chinese investments in Hambantota – New Delhi can at least ensure that no other hostile country uses the harbour for military purposes. India already has an agreement with Ceylon Electricity Board (CEB) to jointly set up a solar power plant in Sampur village, also located in Trincomalee. In a visit to Sri Lanka this month, India’s Prime Minister Narendra Modi also announced grant assistance for the development of the Thirukoneswaram temple in Trincomalee. Slowly, but surely, India is expanding its influence in the port city.
While the energy sector has been identified as a priority area in India-Sri Lanka relations, India’s participation in this sensitive sector has not always been well received by Sri Lankans, especially in Trincomalee.
As India seeks to retain its foothold in its immediate neighbourhood, amid stiff competition from China, trilateral partnerships provide New Delhi a cost-effective option to rebuild trust.
Many in Sri Lanka believe the 1987 Indo-Sri Lanka agreement – which ensured that the tank farm restoration work would be undertaken as a joint venture between India and Sri Lanka, and barred other countries from “taking it over” – has no legal basis. In 2003, negotiations saw all 99 tanks in the facility leased for 35 years at an annual rent of $100,000. However, the lease agreement was not fully implemented, owing to political turmoil in Sri Lanka during the civil war years and bilateral disagreements over operational aspects. In 2017, both sides reportedly agreed in principle to jointly operate the tank farm, but the deal saw little progress.
The new pact would split the tanks between Sri Lankan and Indian companies, nevertheless, local oil worker unions in Sri Lanka continue to staunchly oppose Indian involvement in the project. The issue has also become entangled in Sri Lankan politics and used to stir anti-India sentiments, which as history has shown, can transform into votes during elections.
New Delhi is still reeling from the aftermath of protests and allegations of exploitation against projects undertaken by private Indian companies in Colombo. In February, the Adani Group withdrew from a wind power project, after the Sri Lankan government sought to renegotiate the deal, which had been signed in May 2024. Several other major Adani projects, including the Colombo Port West Container Terminal, have also faced scrutiny and domestic criticism.
As India seeks to retain its foothold in its immediate neighbourhood, amid stiff competition from China, trilateral partnerships provide New Delhi a cost-effective option to rebuild trust. As a leader in infrastructure investment, UAE is unsurprisingly New Delhi’s top pick. The trilateral partnership complements the already robust bilateral partnership the two countries share.
For UAE, partnering with New Delhi comes with its own share of benefits. As the country looks to expand its influence globally, it is turning towards South Asia. This involves strengthening existing diplomatic and commercial relations, foremost with India, and building new ones. A trilateral partnership allows Abu Dhabi to leverage New Delhi’s strong foothold in Colombo’s energy sector. New Delhi also has extensive experience working in trilateral settings on energy sector projects, having worked on several such projects with Japan. At a time when UAE and Saudi Arabia are engaged in an intense geoeconomic competition in Asia at large, Saudi Arabia’s close ties with China, evident from its investments in Chinese projects in Sri Lanka, are also likely pushing Abu Dhabi to explore closer ties with New Delhi.
Businesses may be wary of investing in a project that currently lacks a concrete plan of action. Yet the agreement, bringing UAE to the table, is expected to strengthen India’s position.
