Chinese negotiators would no doubt have expected some give and take, which makes their unwillingness to compromise on these points hard to decipher. Illustration: Hashan Ranatunge
Unredacted by our political correspondent
Last month China Merchants withdrew from its logistics hub project at the Colombo Port. Now Sri Lanka may also lose Sinopec’s $3.7 billion oil refinery investment in Hambantota.
The proposed refinery has run into a major – potentially decisive – obstacle. The Cabinet Appointed Negotiating Committee, or CANC, tendered its recommendation a few months ago, though it wasn’t made public. They advised the government to cancel its agreement with Sinopec Unredacted learnt this week.
The key sticking points in negotiations, which lasted over a year, were tax holidays and how much of the refinery’s output could be sold domestically.
The committee’s recommendation raises questions about the government’s handling of the largest foreign investment proposal in Sri Lanka’s history, especially at a time when countries are vying to attract refinery investment.
The idea of an export-oriented refinery in Hambantota has been pushed by multiple governments. Initial discussions were held during President Gotabaya Rajapaksa’s tenure. After calling for expressions of interest, which attracted seven proposals, Sinopec was selected in 2023, during President Ranil Wickremesinghe’s government. When President Anura Kumara Dissanayake visited Beijing in January last year, the government signed an agreement with Sinopec. Some details were left open, and the CANC and Sinopec have been hashing out the fine print since.
The last time they met was on February 3rd. Three Sinopec executives represented the energy giant at the Zoom meeting. CANC members representing Sri Lanka included Udayanga Hemapala, who was the energy ministry secretary, and a couple of other civil servants. Duminda Hulangamuwa, the president’s economic adviser, also logged on.
Sinopec wanted the government’s nod to sell 40% of the refinery’s output domestically, as well as a 25-year tax holiday and more land. The government was willing to lease more land, but wasn’t willing to fully concede on the other points. Citing Sri Lanka’s economic sovereignty and long-term energy security, the CANC offered to explore allowing 20% of the output to be sold domestically, half of what Sinopec asked for. It also rejected Sinopec’s tax holiday demand.
Chinese negotiators would no doubt have expected some give and take, which makes their unwillingness to compromise on these points hard to decipher. Government and industry insiders suspect Sinopec might have wanted to exit anyway by this point. An industry insider complains CANCs aren’t generally equipped with sufficient technical and negotiating advice. Even when negotiating complex, big-ticket deals, CANCs don’t usually hire transaction advisers — often consultancy firms or investment banks.
Ultimately, the end result is Sri Lanka’s refinery expansion plans are back at square one. The CANC has backed upgrading the state-owned Sapugaskanda refinery. The government says it will call for tenders in the next few months.
FSP’s game plan
The Frontline Socialist Party, or FSP, which broke away from the JVP in 2012, has been making concerted efforts to attract disillusioned sections of the JVP, especially trade unions. Its star is rising among left political circles, and the government is beginning to feel the pressure– both from within the party and on the outside.
The breakaway group’s campaign is gaining momentum among grassroots JVP organisers, who are starting to feel betrayed by some of the JVP’s bigwigs. Unredacted learns they believe some leaders, by cosying up to businessmen, are corroding the JVP’s values and identity.
The FSP has seized on this opening. Their cadre are courting the JVP’s more radical leaders and trade unionists — organising discussions with these disgruntled groups to try and build alliances. During these meetings, they’re reminding their former comrades of those who sacrificed their lives to uphold the JVP’s principles, which they say are now being abandoned.
The party has also mobilised public protests against the anti-terrorism and organised crime prevention bills, highlighting the death of a young man when he was in the Homagama police’s custody.
Provincial polls saga
The government’s also facing pressure from the periphery. Tamil political parties in the North are planning to launch a campaign demanding that long-delayed provincial council elections be held immediately.
The decision was reached during a recent meeting between M.A. Sumanthiran, representing the Ilankai Tamil Arasu Katchi, and Suresh Premachandran from the Democratic Tamil National Alliance.
Tamil parties’ battle with the parliamentary select committee looking into the matter came to a head last month, when Ranjith Madduma Bandara, Mano Ganesan, Shanakiyan Rasamanickam, and Nizam Kariapper walked out. They said the committee was stalling. A legal technicality — a delimitation process that is going nowhere — has delayed elections so far.
Sinopec refinery deal, worth $3.7 billion, faces the axe Tamil parties propose simply repealing the 2017 amendments to the Provincial Councils Act that started the delimitation process. Then elections can be held under the old rules, overcoming the current impasse. They say electoral reforms can be done after the polls.
The select committee, chaired by Vijitha Herath, first met in March this year. The resolution creating the committee specified that the committee was to deliver its report within three months. Now, in November, deliberations continue with no end in sight.
SJB fears RW puppeteering
Those hoping for a UNP-SJB alliance will have to keep hoping. Now the SJB suspects UNP leader Ranil Wickremesinghe’s camp of goading Rishad Bathiudeen, the All Ceylon Makkal Congress leader, into distancing himself from their party. Bathiudeen recently said his party wouldn’t tolerate being “slaves” to the SJB.
The SJB thinks Wickremesinghe’s camp is trying to weaken Premadasa’s relationships with Tamil and Muslim political allies.
Premadasa appeared to respond indirectly to Bathiudeen during a speech on his mother’s birthday. Speaking at a temple in Ratmalana, he recalled how the SJB stood up for Muslim rights when Gotabaya’s government forcefully cremated Muslims who died during the Covid-19 pandemic.
“If any government acts against Buddhism or the Buddhist robe, we will stand against it. Similarly, if anyone acts unjustly against the Muslim religion, we will not allow that either,” Premadasa said, stressing that neither he nor the SJB had ever engaged in communal politics.
A few hours after the speech, Bathiudeen called Premadasa, an SJBer close to Premadasa said. Bathiudeen asked him not to interpret his remarks as a serious political break. Bathiudeen told Premadasa that public anger over the SJB’s response to recent protests by Buddhist monks, including comments party leaders made while visiting the Siam Order’s chief prelates in Kandy, had prompted his speech.
Wickremesinghe, meanwhile, continues to dismiss a UNP-SJB alliance. “There is an expectation among some that a UNP-SJB alliance would be politically successful and secure victory at future elections,” he said recently. “However, such an assumption could be misplaced, as politics has changed today.” Instead the UNP plans to speak with Gen Z and millennials to project a new image.
Homecoming for Namal
Namal Rajapaksa, now a national list MP, will soon have a “homecoming” in his old constituency, Hambantota. On Monday, the Hambantota Magistrate’s Court sent a case against Rajapaksa and 40 others to the Hambantota High Court. The charges involve damage to public property during a 2017 protest against the Hambantota Port deal.
Indictments will be served on November 16th. Namal will share the dock with former MPs and provincial councillors.
Namal secured bail in the Krrish case but remains remanded in connection with the Airbus case. He will travel south in the care of the prison guards rather than at the head of a motorcade.
Unredacted is our first column. Unlike Headline’s reporting of the week’s burning issue, and Examination’s slowly-digested longform, Unredacted is a fly-on-the-wall watching and examining politicians’ and bureaucrats’ powerplay on the decisions that matter.
This political column continues the island’s long tradition of insider political journalism, from the 19th century Ceylon Examiner to today’s Sunday Times Political Column, and, of course, the inimitable Suranimala.
