By Shiran Illanperuma
The US government has slapped sanctions on 24 Chinese companies, including several subsidiaries of China Communications Construction Company (CCCC), which has a significant presence in Sri Lanka.
CCCC subsidiary China Harbor Engineering Company (CHEC), is the builder and operator of Port City Colombo – the single largest foreign direct investment in Sri Lanka’s history. The project promises to add over 375,000 jobs, and over 10 billion U.S. dollars to the economy.
At a time when Sri Lanka’s unemployment is nearing pre-war levels of above five percent, and foreign exchange reserves have dwindled to around six billion U.S. dollars, any effect sanctions could have on the Port City are cause for concern.
Currently, CHEC is not a sanctioned entity listed by the U.S. Department of Commerce. The Embassy of China in Sri Lanka has said that sanctions on CCCC have no international legal standing, and will not interfere with business between Sri Lanka and China.
Still, investors are a shaky bunch. We can only wait and see if things escalate as the U.S. elections draw closer. The current conundrum is a classic example of how sanctions, no matter how “targeted”, are a fundamentally indiscriminate tool of coercion.
In Venezuela, sanctions have caused up to 40,000 deaths between 2017-2018. In Iran, they hampered the state’s access to medicine and medical equipment at the height of the COVID-19 pandemic. In Syria, they have starved a people torn asunder by war.
Sanctions affect not just the people of targeted states, but also networks of allies and trade partners, thereby destabilizing blocs of multipolarity. Sri Lanka, for example, has often experienced the collateral damage of sanctions and wars on West Asia.
Refined petroleum is our single largest import bill at over two billion U.S. dollars a year. Sri Lanka has one refinery, built by Iran for the Ceylon Petroleum Corporation (CPC) in 1969, but sanctions disrupt cheap imports of Iranian crude and weigh on our balance of payments.
Sri Lanka’s biggest tea export markets are Russia and West Asia. When sanctions devalue the Russian ruble, or prohibit Iran from trade in U.S. dollars, Sri Lanka inadvertently suffers. Sanctions on Iran, Iraq and Syria, jack up oil prices while narrowing our export markets.
Lest we forget, Sri Lanka too has been subject to sanctions, being the first victim of the United States’ Hickenlooper Amendment – a legal instrument designed to punish decolonizing nations for expropriating assets of private U.S. businesses.
In 1961, faced with dwindling foreign currency reserves, the then government of Ceylon nationalized the import, storage and distribution of oil from US, English and Dutch companies, forming the state-owned Ceylon Petroleum Corporation (CPC).
By breaking the monopoly of corrupt Western corporations, the government was able to acquire oil from the Soviet Union and the United Arab Republic (UAR) at concessional rates, which was crucial for keeping the economy on life support.
The Hickenlooper Amendment was invoked to suspend U.S. aid to Sri Lanka. Western oil companies exerted their influence on international shipping lines to disrupt fuel supplies to the country. The World Bank branded Sri Lanka as no longer credit worthy.
Sanctions robbed Sri Lanka of a chance at tiding over the foreign exchange crisis and focusing on industrialization. Instead, the government had no choice but to maintain, at any cost, the provision of basic welfare including free healthcare and a rice ration.
Sri Lankans, especially those eager to wear the branding of “Leftist” or “nationalist”, should wholeheartedly condemn unilateral sanctions imposed on the few countries that not only dare to follow their own path of development, but assist Sri Lanka in doing the same.