US sanctions could put China's Sri Lanka project in trouble

The US’ first-ever sanctioning of Chinese companies involved in building artificial islands in South China Sea may affect the fate of several of Beijing’s under-construction One Belt, One Road (OBOR) projects including the strategically-sensitive Port City Colombo project.

India and other Western countries have tried in vain to dissuade Sri Lanka from handing over the Colombo Port City project in its south-west to China. Chinese companies had earlier completed the Hambantota port in the south-east. This has helped China establish lookouts on both flanks of Sri Lanka overlooking the Indian Ocean.

Things are likely to change after the US sanctioned 24 Chinese companies, which means US companies cannot do business with them. Sources said some of the Chinese companies are in tie-ups with US firms as subcontractors and equipment suppliers in the Colombo Port City project and it seems unlikely that they will get a special waiver.

If this first economic strike by an executive fiat becomes law, sources expect the legislation to be more well-rounded since there is bipartisan political consensus in the US on containing China. This means a future law could even bar third country companies from partnering with Chinese companies. This possibility is high after reports quoted US officials as saying that the sanctioned mother company CCCC is the “Huawei of Construction.” This would further cripple Chinese construction activity in other countries unless their leaders decide to defy the US, they added.

Sri Lanka’s involvement with Chinese companies had begun under Mahinda Rajapaksa as President. Rajapaksa is back and more politically powerful after his brother comprehensively won the Presidential elections and he helmed the sweep of the Parliamentary polls.

Though Rajapaksa has ensured that diplomatic civility has guided India-Sri Lanka ties, he has made no move to accommodate Indian interests by opening a port on the northern coast or allocating oil blocks in the common waters separating the two nations.

Sources said if the US sanctions gather pace, not just Colombo Port City but other infrastructure projects in Myanmar and Thailand, that cause South Block unease, may seize-up and could be up for grabs. In this respect, they referred to moves by Japan which has set up a mega fund for projects in Asia Pacific and the US that has created a new overseas infrastructure funding organisation which could fill the breach.

(The Tribune)