Russian oil and Indian money for suffering Sri Lanka
- Around 90,000 tonnes of Siberian light crude will be sent to the country’s only refinery; cash needed from India until IMF loan is approved
- The island nation is suffering its worst economic meltdown since independence, with shortages of fuel and other vital goods making life miserable for its 22 million people
Cash-strapped Sri Lanka took delivery Saturday of Russian oil – which could soon be subject to a European embargo – to restart operations at the country’s only refinery, the energy minister said.
The island nation is suffering its worst economic meltdown since independence, with shortages of fuel and other vital goods making life miserable for its 22 million people.
The state-run Ceylon Petroleum Corporation (CPC) refinery was shuttered in March in the wake of Sri Lanka’s foreign exchange crunch, which left the government unable to finance crude imports.
The Russian crude delivery had been waiting offshore of the capital Colombo’s port for over a month as the country was unable to raise US$75 million to pay for it, energy minister Kanchana Wijesekera said.
Colombo is also in talks with Moscow to arrange direct supplies of crude, coal, diesel and petrol despite US-led sanctions on Russian banks and a diplomatic outcry over Russia’s invasion of Ukraine.
“I have made an official request to the Russian ambassador for direct supplies of Russian oil,” Wijesekera told reporters in Colombo. “Crude alone will not fulfil our requirement, we need other refined (petroleum) products as well.”
Around 90,000 tonnes of Siberian light crude will be sent to Sri Lanka’s refinery after the shipment was acquired on credit from Dubai-based intermediary Coral Energy.
Wijesekera said Ceylon Petroleum Corporation (CPC) was already in arrears of US$735 million to suppliers and no one came forward to even bid for its oil tenders.
He added that the Siberian grade was not an ideal match for the refinery, which is optimised for Iranian light crude, but no other supplier was willing to extend credit.
Sri Lanka will nonetheless call for fresh supply tenders in two weeks before the stock of Siberian light runs out, Wijesekera said. The Sapugaskanda refinery on Colombo’s outskirts will resume work in about two days.
European Union leaders are meeting on Monday in an effort to negotiate a fresh round of sanctions against Russia over Ukraine conflict, including an oil embargo.
Russian oil is already subject to a US embargo and its barrels have traded at a steep discount from international benchmarks, which have risen substantially since the conflict began.
Sri Lanka’s economic crisis has seen long queues of motorists outside gas stations, waiting hours and sometimes even days for scant supplies of petrol and cooking gas. Its people are also grappling with acute shortages of imported food and pharmaceuticals, along with record inflation and lengthy daily blackouts.
Anti-government protests erupted into riots earlier this month, leaving nine people dead and many more wounded. A demonstration outside President Gotabaya Rajapaksa’s office in Colombo demanding his resignation over the government’s economic mismanagement entered its 50th day Saturday.
Sri Lanka is also counting on more help from India until it secures an International Monetary Fund programme that it’s hoped would unlock aid from other lenders to help face the worst economic crisis of its independent history.
Prime Minister Ranil Wickremesinghe said he’s looking to fast track talks with the IMF as the nation will need about US$4 billion this year from the multilateral lender and creditors including China and Japan.
Sri Lanka’s High Commissioner to India, Milinda Moragoda, met Finance Minister Nirmala Sitharaman in New Delhi and reiterated that the island nation would require bridging finance until the IMF programme is finalised.
“In this context, the minister and the high commissioner explored the possibility of increasing and restructuring the help provided by India in the form of credits for essential commodities and fuel, as well as balance-of-payment support,” the high commission said on its Facebook page.
Sri Lanka’s central bank governor, Nandalal Weerasinghe, told a committee meeting in parliament this week that discussions with India were also ongoing for a swap facility of about US$1 billion from the Reserve Bank of India.
Weerasinghe said the next three months would be the “biggest challenge” as the nation faced foreign-exchange shortages of about US$500 million monthly.
While Sri Lanka expects about US$800 million to be channelled from ongoing World Bank and Asian Development Bank projects toward emergency help over the coming six months, the nation has so far largely been dependent on Indian credit for essential imports.