Price Hikes Lead Sri Lanka to Ask Russia for Discounted Oil

July 7, 2022 Topic: Sri Lanka Region: Asia Blog Brand: The Buzz Tags: Sri LankaOilEnergy SecurityGas PricesRussiaRussian Oil

Price Hikes Lead Sri Lanka to Ask Russia for Discounted Oil

Oil price increases have forced the Sri Lankan government to close schools and institute remote work for non-essential services.

Sri Lankan president Gotabaya Rajapaksa announced on Wednesday that he had asked Russian leader Vladimir Putin to supply the small South Asian country with discounted fuel, a move that would help it to weather its worst political and economic crisis since the beginning of the twenty-first century.

“Had a very productive telecon [conversation] with the #Russia President, Vladimir Putin,” Rajapaksa wrote on Twitter after the call. “While thanking him for all the support extended by his [government] to overcome the challenges of the past, I requested an offer of credit support to import fuel to [Sri Lanka] in defeating the current econ[omic] challenges.”

Sri Lanka’s economic challenges began shortly after the Covid-19 pandemic, which negatively affected Sri Lanka’s industry and virtually eliminated revenue from tourism. The economic shortfall was made worse by questionable economic policies from the Rajapaksa government, which instituted major tax cuts shortly after his election. The cuts sharply degraded Sri Lanka’s ability to raise revenue, leading it to struggle in paying off international loans and constraining its ability to import essentials such as food, oil, and medicine. Rajapaksa’s popularity plunged during the crisis, and regular demonstrations throughout 2021 and 2022 led to the resignation of his younger brother, Prime Minister Mahinda Rajapaksa.

One of Sri Lanka’s largest economic problems relates to oil imports, a resource the island country does not produce domestically. Oil prices shot up in the aftermath of Russia’s invasion of Ukraine in late February, leading the Sri Lankan government to close schools and institute remote work for non-essential services in an effort to conserve fuel. The state-run oil company is also deeply in debt, complicating its ability to make further purchases on credit.

The elder Rajapaksa appears to be banking on Russia’s willingness to export fuel further afield after sharp import cuts from Europe in the aftermath of the invasion. Like neighboring India, Sri Lanka has largely remained neutral during the conflict, avoiding direct criticism of Putin and abstaining on a United Nations General Assembly resolution that directly condemned the Russian invasion.

Rajapaksa hinted after the call that Russian largesse would strengthen the two countries’ ties, saying that he and Putin “unanimously agreed that strengthening bilateral relations in sectors such as tourism, trade [and] culture was paramount in reinforcing the friendship our two nations share.”

Trevor Filseth is a current and foreign affairs writer for the National Interest.

Image: Reuters.