US finance agency lends to Sri Lanka port to counter Chinese influence.

The US Foreign Development Agency has announced that it will provide a $553 million loan to establish a deep-water shipping-container terminal at the Port of Colombo in Sri Lanka.

The loan package is tied to Adani Ports, a conglomerate closely linked to Indian Prime Minister Narendra Modi and still reeling from a short-seller attack in January. Adani will help develop the terminal with Sri Lankan partners.

The funding from the US International Development Finance Corporation matches the big-ticket deals China’s development banks have struck around the world over the past decade. Under the Belt and Road Initiative, the centerpiece of President Xi Jinping’s foreign policy, China has made loans to build connections across Asia, including Sri Lanka. Now the United States and to some extent India intend to catch up – even to improve China’s record.

The Development Finance Corporation was created during the Trump administration to bankroll international infrastructure projects, work with the State Department to support US foreign policy and curb Chinese influence.

“The reality in this region and the international trade makes this a critical addition to the international infrastructure,” Scott Nathan, CEO of the US agency, said at a press conference in Sri Lanka’s capital, Colombo. Adani Ports CEO and son of the group’s founder, Gautam Adani, was joined by Karan Adani, who went a step further in his comments, saying the extra half-billion dollars was “a sign of regional security” and seemed to question defense concerns. He said.

In their turn to explain how the loan shows the US and India’s commitment to the debt-ridden island nation and the rest of the Indo-Pacific, they didn’t mention China by name, but they didn’t need to.

The international port project is of special importance to Sri Lanka. Located at the turning point between the Malacca Sea and the Suez Canal, the country sees half of the world’s commercial ships pass through. Colombo’s port, the busiest on the Indian Ocean, has been operating at 90 percent capacity for years.

In the year Under the Rajapaksa ruling family, who ruled Sri Lanka until the country’s economic collapse in 2022, Chinese banks and engineering companies built a huge deep-water port on the island’s relatively remote southern coast. Hambantota, the name of that project, was the white elephant in the room during Wednesday’s opening statements.

Hambantota, a bastion of Rajapaksa’s political power, built at a cost of more than $1 billion and which Sri Lanka could not afford, was eventually ceded to China on a 99-year lease with 15,000 hectares of land. . In the year Before the outbreak disrupted trade in 2020, the port was handling just 1.2 million tons of cargo annually. Colombo Port handles over 30 million tonnes of cargo annually and plans to quadruple this volume with new terminals.

Hambantota became a symbol of what President Biden called China’s “debt trap diplomacy” at the first U.S. Partnership for Economic Prosperity summit in Washington last week.

Mr. Nathan told the news conference that the Biden administration’s investments in infrastructure “are transparent and will not burden countries with sovereign debt.”

India is also eyeing China as it struggles to gain or maintain influence in the rest of South Asia. Diplomats of India and China have been trying to make their country a useless partner to Sri Lanka, Bangladesh and Nepal.

A US loan is a way for India to finance long-term projects. In Mr. Modi’s era, that means doing big business with the country’s top conglomerates. New York-based Hindenburg Research’s stock price rose 2,500 percent in the five years leading up to a report in January that hit the company with allegations of stock manipulation and accounting fraud. .

The Adani Group was priced out, and the public offering had to be cancelled. At the time, the company accused foreign critics of a “calculated attack on India” and “disdain for Indian institutions”. Most of the conglomerate’s shares are still well below their peak, and Mr. Modi is not seen in public with Gautam Adani. But the conglomerate’s finances have continued, and some corporate companies, including Adani Port, have regained their market value.

The Biden administration’s willingness to do business with Adani Group could burnish the company’s reputation abroad. Karan Adani said the port deal “reaffirms our vision, capacity and governance by the international community.”

Washington’s willingness to support a complex and strategic infrastructure deal represents a step forward for its ambitions in the region. It seems to confirm Mr. Adani’s view that “the relationship between Sri Lanka, the US and India is multifaceted and promising.”

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