NEW DELHI – India and Sri Lanka on Sunday (6) signed their first-ever defence cooperation agreement and, along with the UAE, sealed a trilateral pact to transform Trincomalee into an energy hub during Prime Minister Narendra Modi’s first visit to the island nation under President Anura Kumara Dissanayake. The visit also saw talks on the fallout of US tariffs prompting Colombo to seek deeper economic engagement between the maritime neighbours.

Modi, the first foreign leader to be hosted by 56-year-old Marxist president Anura Kumara Dissanayake since his election last September, arrived in Colombo on Saturday (5). The visit comes just over three months after Dissanayake travelled to India on his maiden overseas trip, followed by China – underscoring Colombo’s regional balancing act.

The meeting also took place against the backdrop of both India and Sri Lanka being hit by steep so-called ‘reciprocal’ tariffs by the Trump administration in Washington, which came up during talks.

Underlining New Delhi’s strategic lens, Modi said that Sri Lanka and India have “shared security interests”. “The security of both countries is interconnected and co-dependent,” he stated.

The Indian Prime Minister also thanked “President Dissanayake for his sensitivity towards India’s interests” and welcomed the “important agreement made in the area of defence cooperation”.

“We have also agreed to work together on the Colombo Security Conclave and on broader security cooperation in the Indian Ocean,” he added.

Speaking to reporters later, Indian foreign secretary Vikram Misri described the defence agreement as “an umbrella framework document that will make existing defence cooperation initiatives more structured.”

He said it would cover “continuing and even intensifying the tradition of high-level visits between the two countries, more joint exercises, capacity building in various areas, exchanges in HADR-related operations, increasing port calls by naval units of both countries, and exploring defence industry cooperation”.

Noteworthy move

The signing of the defence cooperation agreement by the Sri Lankan government under President Dissanayake is notable, as it is another reflection of how he has shaped the trajectory of the Marxist Janatha Vimukthi Peramuna (JVP), a party historically hostile to India, on its path to power.

Sri Lankan defence secretary Sampath Thuyacontha, was quoted in an English language daily as saying the decision to formalize a Memorandum of Understanding stemmed from the 2023 Defence Dialogue. He also noted that India provides around 750 training slots annually for Sri Lankan military personnel.

Misri added that President Dissanayake has consistently assured India that Sri Lankan territory would not be used against Indian interests—an assurance he reiterated during Saturday’s talks.

“In fact, if I recall correctly, during today’s discussions he said that neither Sri Lanka’s land nor the oceans around it will be allowed to be used in any manner inimical to India’s security,” said the Indian diplomat.

India has long harboured concerns over China’s growing footprint in the region – particularly the development of Sri Lanka’s Hambantota port and the frequent docking of Chinese research vessels.

Trilateral pact

Among the seven agreements signed during the visit was an unusual trilateral pact involving India, Sri Lanka, and the UAE, aimed at developing Trincomalee as an energy hub. The agreement was signed by Indian Foreign Secretary Vikram Misri, Sri Lankan Energy Secretary Udayanga Hemapala, and UAE Ambassador to Sri Lanka Khaled Nasser AlAmeri.

The move comes close on the heels of Sri Lanka’s agreement with Chinese state oil giant Sinopec, signed during Minister Dissanayake’s recent visit to Beijing, for the construction of a $3.7 billion refinery at Hambantota port.

Describing the UAE as a “strategic partner” in India’s energy security, Misri said it was “an ideal partner for this particular exercise that is being done for the first time in this region.” He noted that the memorandum of understanding was a “government-to-government agreement” that outlines “some of the broad terms of reference for this cooperation”.

The specifics, he added, would follow in the next phase, which involves “the identification and the nomination of specific agencies and entities – government, private sector, or related to the governments themselves – that will try and realize the business-to-business part of this agreement.” The Gulf state’s exact role, he said, would become clearer “once B2B discussions kick off under this MoU”.

Misri outlined the range of projects the agreement could facilitate, including a long-proposed multi-product pipeline between India and Sri Lanka and the development of the largely unused oil tank farms in Trincomalee. “You are aware that in Trincomalee we have the tank farms. Some of them are already being developed and utilized by Lanka IOC, but there are many more that are lying unused… and there is a possibility that they will also be developed and utilized under this particular MOU,” he said.

The Indian Prime minister also announced that India had “decided to reduce interest rates”, while stating that a bilateral Debt restructuring agreement will “provide immediate assistance and relief to the people of Sri Lanka”.

Loans to grants

“In the last 6 months alone, we have converted loans worth more than USD 100 million into grants,” said Modi.

While the Indian PM didn’t give more details, it is learnt that the interest rate reduction is related to the $400 million currency swap and $2.2 billion debt owed under the Asian Clearing Union (ACU) mechanism by Central Bank of Sri Lanka. Last year, Sri Lanka had transferred $800 million to RBI as part of a phased repayment plan.

These were counted as part of Indian assistance during Sri Lanka’s 2022 economic crisis, which in total amounted to nearly $4 billion.

The debt restructuring agreement, mentioned by the Indian PM, was signed recently by India’s Exim Bank.

Reconciliation

Later on Saturday evening, Modi separately met with the Sri Lankan leader of opposition Sajith Premadasa and Sri Lankan Tamil leaders.

In his public remarks, Modi said the reconciliation issue had been discussed during his talks and reiterated Indian support for Sri Lankan Tamils securing their rights under the 13th Amendment, though he did not mention it explicitly.

“We also talked about reconstruction and reconciliation in Sri Lanka. President Dissanayaka appraised me of his inclusive approach. We hope that the Sri Lankan government will meet the aspirations of the Tamil people and fulfil its commitment towards fully implementing the Constitution of Sri Lanka, and conducting Provincial Council Elections,” he said.

For Sri Lankan Tamils in the north, a persistent grievance has been the poaching by Indian trawlers in their waters. Indian fishermen had regularly crossed into these areas during the civil war, but tensions rose after the war ended and Tamil fishermen resumed operations on their own vessels.

“We also discussed issues related to fishermen’s livelihood. We agreed that we should proceed with a humane approach in this matter. We also emphasized on immediate release of the fishermen and their boats,” said Modi.

The Indian foreign secretary said that both sides discussed the need to intensify engagement. “Both sides are in touch with each other on the possibility of convening the next round of fishermen’s association talks between Sri Lanka and India. The idea is to continue this engagement and arrive at mutually acceptable ways to avoid some of the more difficult situations that arise as a result of this issue,” said Misri.

With the visit coming just two days after the United States disrupted global trade flows with steep new tariffs, Misri confirmed that the topic was also raised in the leaders’ discussions.

“Look, it is obviously something that has impacted everybody. I think Sri Lanka is also dealing with this issue. There was a reference to this … or discussions on this during the meeting between the President and the Prime Minister,” he said.

In South Asia, Sri Lanka has been hit with the steepest rate of 44%, while India faces tariff of 26%. While the US has framed the move as a response to tariffs on its exports, the calculations appear to be driven by trade deficits, rather than actual import duties. As a result, even countries, like Singapore which has virtually zero tariffs under an FTA with the United States, have been affected by the baseline 10 percent levy.

According to Misri, Sri Lankan President Dissanayake emphasized the importance of strengthening economic ties with India in light of these changes and his country’s ongoing economic recovery.

“Of course, the Prime Minister assured him that India would always continue to stand by Sri Lanka as it encountered and dealt with these difficulties,” he said.

-thewire.com