Do you know where Sri Lanka is? It's an island in the Indian Ocean, separated from Hindustan by just 50 kilometers. Since the arrival of Europeans in the early 16th century, the island was a colony – first of the Portuguese, then the Dutch, and finally the British. All those years, it was called Ceylon, in the European style.
In 1972, the country gained independence and changed its name to Sri Lanka. Until the mid-2000s, like many other former colonies, it plunged into a series of civil wars. When the country finally recovered from the chaos, it turned out that it now had to figure out how to attract investment on its own.
And what could Sri Lanka really offer the world? Tea, textiles, precious stones – these are all minor things you can't make a huge fortune from. But what is truly valuable is its ideal geographical location. The island lies at the crossroads of the world's busiest maritime trade routes, connecting Asia, America, Europe, and the Middle East.
So, when the civil war in Sri Lanka ended, the authorities decided to focus on developing ports. And China decided to invest in this project – the state loaned Sri Lanka $8 billion to build the Hambantota Port in the south of the island.
But in the end, the project turned out to be unprofitable – not only was a lot of money spent on altering the bay's landscape, but the port itself did not generate enough profit to cover the debts. And China always strictly enforces the terms of the agreement.
Therefore, in 2017, the agreement was revised, and China received 70% of the port's shares and the right to lease it for 99 years. Meanwhile, the debt still hangs over Sri Lanka. The lease agreement only freed it from $1 billion of the $8 billion.
Why does China need a loss-making port in Sri Lanka? There are suspicions that this is how China is creating a good foothold in the Indian Ocean – both for trade and military purposes. This, in turn, throws a wrench in the works for India, which traditionally considers the Indian region its sphere of interest.
But as if that weren't enough, in 2020, the Sri Lankan authorities chose a Chinese company to modernize the country's main port – Colombo. Initially, the project was handled by the Indians and Japanese, but when the president of Sri Lanka changed, the contractors changed as well. The Chinese spent $1.4 billion on the development of Colombo and, in return, received the right to use 62 hectares of land on a 99-year lease, similar to the port in Hambantota.
Both projects are examples of "debt trap diplomacy," where China gives generous loans to not-so-wealthy countries, knowing they won't be able to pay their debts, and then essentially takes over their assets in rent-free leases.
But the story of Sri Lanka is just part of the bigger picture – all because in recent years, China has been implementing the "One Belt, One Road" project. If you're interested in what happens next, read the following blog.