India’s Island Neighbours: Assessing Ties with Maldives and Sri Lanka

Published October 23, 2024 | This is a working paper presented at the Takshashila Institution Internal Conference on ‘India’s Neighbourhood’, September 2024

Authors

Executive Summary

This paper recommends a pathway for India to consider in its dynamically evolving relations with its two island neighbours, Maldives and Sri Lanka. Vis-à-vis Maldives, the paper proposes that water diplomacy is one of India’s most vital tools in the toolkit to deal with Maldives. Further, India may want to capitalise on narratives of exploitation of Tibetan resources to internationally de-legitimize Chinese exports of glacier water, while propagating the idea that India is the ‘first responder’ to situations such as a water scarcity crisis in Maldives. Further, the paper contends that despite India’s geographical proximity and ‘first-responder’ narrative, coercive diplomacy will not work with a China-leaning government in the Maldives. It would help, in this regard, to keep tourism alive, and revitalise tourism-related sentiment towards the Maldives in India, especially after positive developments in the aftermath of Muizzu’s first state visit to India in early October 2024. Finally, the paper makes a case that India must continue to keep export quotas to Maldives high for essential goods, to help with the negative perception of India among the populace.

From the perspective of India-Sri Lanka relations, the paper suggests that while with the new Dissanayake government in power, it is hard to say what exactly will work for Indian policy vis-à-vis Sri Lanka going forward, India must stay committed to discussing the challenges faced by Indian Origin Tamils (IOTs) in Sri Lanka, including at the United Nations. However, the Kachchatheevu islet dispute must be left untouched as it is already resolved for now, and re-opening the issue may cause unnecessary damage to high-level relations. The paper also explains the historical and structural causes of the fishery issue, and recommends a pathway to resolution through regular ‘joint working group’, navy, and coast guard deliberations, with complete and consistent involvement of the Tamil Nadu government.

I. Introduction

India’s neighbourhood is marred with dynamically evolving politics and geopolitics. Its relations with its smaller neighbours often witness a crest and trough of cooperation and contestation. The latter is especially true considering that such countries adopt a policy of hedging and bandwagoning between two Asian major powers – India and China. Internally, too, India’s neighbours have complex political systems functioning on the spectrum between quiescence and upheaval, with each state having varied implications for their relations with India. Most recently, from the Indian perspective, this is demonstrated by the shift from a stable relationship with Bangladesh to an uncertain and queasy one, in the aftermath of Sheikh Hasina’s renunciation of power at the height of student protests in the country.

This brief paper assesses India’s contemporary ties with its two island neighbours – the Maldives and Sri Lanka. It looks at the China factor and its consistent implications for Malé-Delhi relations, and suggests a pathway for the two neighbours to revive relations, emphasising tourism, people-to-people ties, and India’s role as a ‘first responder’. With Sri Lanka, the paper assesses more historical issues central to tensions in the bilateral relationship, including fishery disputes, Kachchatheevu islet-related disputes, and the issue of how IOTs are treated in Sri Lanka. The paper makes a case for expanding economic and business cooperation with Colombo, and dealing with the abovementioned historical issues either through ground-actor negotiations or a hands-off approach.

II. The On & Off in India-Maldives Ties

The Maldivian political ecosystem has a pattern vis-à-vis it being either India or China-oriented. Till 2013, India had a good time partnering with Presidents Gayoom and Nasheed. In 2013, Abdullah Yameen came to power and strategically aligned with China, enabling Maldives’ membership in the BRI and the signing of a free trade agreement between the two countries. With Solih, as debts mounted, Maldives withdrew from the said agreement and again developed stronger ties with India. This also created room for India to support Maldives’ debt repayments and infrastructure projects (including a cancer hospital, because till the time such hospitals were built, sensitive domains such as oncological care in Maldives were largely taken care of by visiting Indian doctors). With Mohamed Muizzu in power, we may see a turn to Yameen days vis-à-vis the island nation’s foreign policy approach.

II.I. The ‘China’ Angle at the Center

Between January 8 and 12, 2024, newly elected President Muizzu of Maldives made a State Visit to China to, among other things, lay down a wreath of flowers on the Monument to the People’s Heroes at Tiananmen Square, and elevate the China-Maldives partnership to a ‘Comprehensive Strategic Cooperative’ one.

The Joint Statement reached between the two sides after the Visit is an interesting read. It shows just how pro-China Muizzu is, and how willing he is to turn Maldives away from its previous balanced but India-oriented foreign policy to one that is willing to accommodate China much more. For example, as per the Joint Statement, on Taiwan, Maldives has promised the following:

The Maldives is firmly committed to the one-China principle, recognizing that there is but one China in the world, the Government of the People's Republic of China is the sole legal government representing the whole of China, and Taiwan is an inalienable part of China's territory. The Maldives opposes any statement or action that undermines China's sovereignty and territorial integrity, opposes all "Taiwan independence" separatist activities, and will not develop any form of official relations with Taiwan. The Maldives opposes external interference in China's internal affairs under any pretext and supports all efforts made by China to achieve national reunification.

This text looks like it was pulled straight out of one of Chinese foreign ministry spokespersons Mao Ning or Lin Jian’s speeches. The commitment was also followed up in another press statement made by Muizzu a day after popular elections in Taiwan. In this statement, he reiterated:

The Maldives is firmly committed to the one-China principle, which remains the bedrock of the Maldives relations with China. The rest was a repetition of what was said in the Joint Communiqué. In response, in what one can only perceive as a dig at India owing to the recent tensions between India and Maldives, China has promised its own commitment to Maldives’ sovereignty. The Joint Statement reads:

China firmly supports the Maldives in its efforts to safeguard national sovereignty, independence, and national dignity, respects and supports the Maldives in exploring a development path that suits its national conditions, and resolutely opposes external forces interfering in the Maldives’ internal affairs.

Moreover, as per the statement Muizzu made to the press as soon as he landed at the Velana International Airport, China will soon be sending a technical and finance task force of sorts to Maldives to determine how it can grant concessions for the repayment of approximately 1.37 billion USD in direct loans. 20 per cent of Maldives’ external debt is money owed to China, and this leaders’ meeting has at least been successful in providing the island nation some respite in this regard. Much of it is owed to Muizzu’s pro-China posture.

It is also unlike 2020, when a Twitter spat between Zhang Lizhong, the then-Chinese Ambassador to the island nation, and Mohamed Nasheed, the then Speaker of Majlis, revealed that Maldives needs concessions on the loans, lest it goes bankrupt. The spat started when Nasheed tweeted that Maldives has to repay some 15 million USD from loans granted by a Chinese bank, which was then more than 50 per cent of the government’s income in the same period. To this, Zhang had replied that there is no such payment pending.

As the Twitter trolling fell just short of escalating into an official, diplomatic spat, Nasheed tweeted to Zhang, “Let’s not wait until the 11th hour; let’s be done with this debt problem. Maldives needs a further 2-year grace period, or we will never be able to repay these loans.” In response, Zhang said, “I trust, with joint efforts, there will be a proper and mutually beneficial arrangement to inject more impetus to economic recovery.” Maybe that was Zhang’s codeword for, “the Government just isn’t right today, but maybe tomorrow, it will be!”

In this light, it is also important to note that unlike preceding President Solih, who wanted to keep the Maldivian economy diversified and planned to mobilise concessional financing for development projects on the island with a role being played by the BRI, Muizzu seems to have agreed to rather more elaborate terms on the BRI’s significance in Maldives (at least, as per the Chinese version of the Joint Statement). It reads:

Both sides agreed to take the high-quality construction of the Belt and Road Initiative as a leading factor to strengthen strategic alignment, comprehensively implement global development initiatives, further elevate the level and quality of cooperation, enhance practical cooperation in areas such as green development, digital economy, blue economy, and achieve mutual benefit and common development.

The fact that there is now an acknowledgement that continued commitment to the BRI between the two sides is critical to forging ‘alignment’ is interesting and a matter of concern from the Indian perspective. Although, the Maldivian version of the Communiqué is slightly toned down on this bit:

The two sides agree to focus on pursuing high-quality Belt and Road cooperation in the efforts to better synergize their development strategies, fully implement the Global Development Initiative (GDI), and further enhance the level and quality of cooperation, and strengthen practical cooperation in green development, digital economy, blue economy and other fields, to achieve mutual benefits and common development.

The developments concerning Muizzu’s China visit are all happening as Maldives and India are embroiled in a row over a couple of things – the Maldivians believe that Indian Prime Minister Modi’s recent visit to Lakshadweep islands is a deliberate attempt at undercutting tourism to the island, and Malé’s announcement that Indian military personnel stationed in Maldives are required to withdraw from Maldives. The withdrawal was indeed complete by the May 10 deadline Muizzu set. 

The tourism backlash has been especially defining, given that celebrities, government officials, and businesspersons have all called for a boycott of tourism to the island. But a beneficiary of this wave has been Sri Lanka.

III. People-heavy diplomacy with Sri Lanka

III.I. State-to-State

In India’s ties with Sri Lanka, people-related issues heavily dominate state-to-state relations, even though governments, too, have strong economic relations. This economic diplomacy is most prominently manifested in India’s extension of lines of credit. Most recently, in 2022, India offered Sri Lanka US$ 4 billion in aid, surpassing the IMF’s four-year bailout of US$ 3 billion. From Sri Lanka’s perspective, India will always be a first responder in situations of crisis, and the boon and/ or bane of geography cannot be broken in favour of China. 

This is especially evident from the fact that the new President taking charge in Sri Lanka, Anura Dissanayake, though a leader of the Marxist-Leninist wing of the New People’s Power alliance and considered pro-China, made it clear in a recent interview that any decisions his government takes will consider the potential impacts on India. He also said there is “no contest” between India and Sri Lanka. Moreover, Sri Lanka’s one-year moratorium of February 2024, on any foreign vessels docking at its ports, is a welcome manoeuvre vis-à-vis India’s concerns with Chinese dual-use vessels docking too close to home. Most recently, however, warships from both India and China docked at Colombo, and Sri Lanka pulled off a careful balancing act.

As briefly highlighted above, Sri Lanka has also benefited from backlash Indian tourists launched against Maldives, with Jaishankar stating on February 1, “Next time you want to take a holiday, go to Sri Lanka.” Of course, that led to its own controversy and backlash from Sri Lankans, when just a few days later, the Sri Lankan tourism minister Harin said at an event in Mumbai, “Sri Lanka is part of India.” Nonetheless, the positivity infused by Jaishankar’s remarks may provide a major impetus to the Sri Lankan tourism industry, ravaged in the aftermath of the COVID-19 Pandemic and the 2022 economic crisis. In any case, this year, 20% of foreign tourists coming to Sri Lanka were Indians.

III.II. State-to-Business

Since the 2022 economic crisis in Sri Lanka, the preceding Ranil Wickremesinghe government had quite a friendly relationship with the Indian government, at least economically. And big businesses in India have benefitted from this the most, while also causing controversy in India-Sri Lanka people-to-state and state-to-state relations.

For example, in October 2023, Amul acquired a 52% stake in farmlands owned by the Sri Lankan dairy and farm foods company Milco, as part of a joint venture with the Lankan National Livestock Development Board (NDLB). In fact, Amul seems to have also acquired a 99-year lease on said farmlands – a move similar to China taking a 70 per cent stake in Hambantota port on a 99-year lease. However, concerns pertaining to privatisation were taken up by farmers and dairy producers in Sri Lanka, after which the JV decision was made. Similarly, in April 2024, a JV of Indian and Russian firms (Shaurya Aeronautics (Pvt) Ltd of India and Airports of Regions Management Company of Russia) won the contract to manage the Mattala Rajapaksa International Airport in Hambantota for 30 years, amidst governmental concerns due to the lack of flights at the airport.

Some firms, however, despite massive governmental support on both sides, have been facing headwinds in operations. Most importantly, a legal case filed in June 2024 by a Sri Lankan Diocese and three environmentalists against the procurement process and terms on which Adani Green Energy won a contract to install a 250 MW wind power plant in Sri Lanka, has been Adani’s biggest hurdle. The tariff reductions the contract provides are argued to cause Sri Lanka major financial losses, deeming it illegal to treat this project as an “India-SL Joint Venture.” October 14 is the date set for case deliberations in the Sri Lankan L Supreme Court.

III.III. The IOT Issue

At the UN, India has often critiqued Sri Lanka for not managing the Tamil population’s demands well, despite the clarity provided by the Sirivamo-Sastri agreement of 1964. India advocates that Sri Lanka devolve powers to grassroots governments, while the fear of a rebellion or an uprising in Sri Lanka, in addition to a bias favouring the Sinhalese community, runs deep. However, India, too has excluded India-origin Tamils coming from Sri Lanka to India from the new CAA rules, even though some benefits, such as a 1000 rupee monthly allowance per month, are bestowed upon them. They live as refugees in over 100 camps, and live in an eternal dilemma – to go back and live in a country they no longer feel connected to, or to stay and live in a country where benefits such as livelihood are inaccessible.

III.IV. The Kachchatheevu Issue

After the 1964 and 1976 agreements, New Delhi has never contested the IMBL agreements under which Kachchatheevu Islet fell within the Sri Lankan territory. This is despite the change of government, political, and personality leadership at the Centre through the past several decades. This is until recently. Of course, former Tamil Nadu Chief Ministers Jayalalithaa and M Karunanidhi had moved the Supreme Court in their personal capacity, challenging the International Maritime Boundary Line (IMBL) accords. With their death, the two cases have become infructuous. What is otherwise flagged in Tamil Nadu is a livelihood concern of local fishers, which becomes the duty of the elected state government to take it up with the Centre, for follow-up with their Sri Lankan counterpart. 

This year, however, EAM S. Jaishankar has stated that the previous Congress governments were wrong to give away Kachchatheevu so “callously.” It invited a stark response from both Sri Lankan analysts and the Foreign Affairs Ministry, which stated that “Kachchatheevu was never India’s to give away.” The attempt to re-ignite a closed issue has the potential to create hurdles in the relations moving forward, especially since the domain under question is sovereignty and territoriality.

III.V. Fisher Fissures

Close to 50 fisherfolk from Sri Lanka have already been arrested by Indian authorities in 2024 (of which 13 were released on August 8 from Tamil Nadu jails), on the suspicion of violating the IMBL. Over 80 fisherfolk from India, too, are currently in Sri Lankan judicial custody. From a bilateral angle, it creates avoidable tension between the two sides, bottom-up, beginning with the fisher folk, who in turn pressure their respective governments to do their bidding. As human lives, liberty, and livelihoods are involved, it creates constant tension also between the two governments. Given the sensitive nature of bilateral relations when looked at from the China angle, there is potential for some kind of international trouble. There is also the added angle of some fisher groups and politicians from Tamil Nadu wanting to make it an international law issue at the International Court of Justice and International Criminal Court.

Bottom-trawling and the use of purse-seine nets by Indian fishers have been at the center of all these issues. According to Sri Lankan fishers, government, and independent observers even on this side of the Palk Strait, bottom-trawling and the use of purse-seine nets denies legitimate catch for Sri Lankan fishers in their waters, as they are barred from deploying either under the laws of the land. These practices also destroy fishing fields, which is also of great concern for the Sri Lankan fishers, environmentalists, and government.

Sometimes, the Tamil Nadu government has been seizing purse-seine nets on the land, to prevent their usage. There is however neither consistency nor continuity. Thus, it has not helped ease diplomatic tensions pertaining to the fishing issue between the two countries. There is an undercurrent of tension, when the Sri Lankan Deputy High Commission (DHC) in Chennai is tasked to coordinate the sharing of information about the arrest of Tamil Nadu fishermen by the Sri Lanka Navy and also their release. From time to time, Tamil Nadu fishers’ outfits, and more so political parties keep holding protests outside the DHC office.

Neither the US nor China have gotten involved in what remains a bilateral issue between India and Sri Lanka. Sri Lankan Fisheries Minister Douglas Devananda took it up with the US Charge de’ Affaires in Colombo (in the absence of its Ambassador, in 2022), but the US has not reacted or acted on it. The Chinese Ambassador visited the North of Sri Lanka and distributed relief packages to the local fishers, without mentioning anything about Indian fishers’ mid-sea interventions).

There is little the bilateral Joint Working Group on Fisheries (JWG) has done so far to find any new and mutually acceptable solution, especially since its meetings have been stalled since 2022, and the meeting supposed to be held late last year was canceled due to “internal issues on the island.”  After an initial hiatus, fishermen associations from the two nations met in both countries, first on their own, and later as facilitated by their respective governments, in 2022. This too hit a dead-end, as neither side was willing to make concessions to the other. In recent years, fishers from Sri Lanka’s Tamil North especially have been targeting their Indian counterparts, at times in the mid-seas. They have been holding repeated protests in Jaffna and Colombo, outside Indian diplomatic establishments.

Further, the Sri Lankan Fisheries Department announced a decision to auction over two hundred seized TN fishing vessels, under domestic law. This has added to the victimhood of the Tamil Nadu fishermen, and Chief Minister M K Stalin has written to PM Modi and EAM Jaishankar, to coax the Sri Lankan government to not go ahead with the auction, due to the domestic uproar it may cause.

IV. Way Forward

From the perspective of India-Maldives relations, the following policy measures should potentially be put into place going forward:

- Water diplomacy is one of our most vital tools in the toolkit to deal with Maldives. India has already sent two INS ships to supply over 2000 tonnes of water this year, while China has sourced 1500 tonnes of freshwater from the glaciers of Tibet to gift to the Maldives. India may want to capitalise on narratives of exploitation of Tibetan resources to internationally de-legitimize Chinese exports, while continuing to propagate the idea of India being the first responder to situations such as a water scarcity crisis in Maldives.
- Despite India’s geographical proximity and first-responder narrative, coercive diplomacy will not work with a China-leaning government in the Maldives. It would help, in this regard, to broach the subject of tourism with President Muizzu post a successful state visit to India between 6-10 October, 2024, revitalise tourism-related sentiment towards the Maldives in India.
- In April 2024, India lowered the prices of essential commodities being exported to Maldives, including rice, sugar, and onions, despite the existence of local curbs. India must continue to keep export quotas to Maldives high for such goods, to help with the negative perception of India within the people.

From the perspective of India-Sri Lanka relations, the following policy measures should potentially be put into place going forward:

- With the new Dissanayake government in power, it is hard to say what exactly will work for Indian policy vis-à-vis Sri Lanka going forward. However, India must stay committed to the issue of IOTs’ protection in Sri Lanka, including by raising the issue at the UN. It is important to note that Dissanayake did not secure a majority with the Tamil seats, and so there must be careful navigation of the issue bilaterally. One way to do this, for example, However, the Kachchatheevu issue must be left untouched as it is already resolved for now, and may cause unnecessary damage to high-level relations.
- India must continue successful tourist and people-oriented projects such as LankaQR, to introduce Unified Payments Interface to not just Indian tourists travelling to Sri Lanka, but also to Sri Lankans conducting local transactions. For the Indian government to continue to support direct B-2-C transactions between Indian businesses and Sri Lankan consumers will be helpful in this regard. At the same time, the government must continue to support Adani Green Energy with legal support to carry on with the wind power plant.
- The fishery issue is historic, structural, and not easily resolved. And it cannot be so, until the Tamil Nadu government is roped in consistently, and there are continued discussions between the JWG members, navies, and coast guards. Instances of shooting must be curbed through govt. intervention, while bilateral dialogues at different levels must discuss the de facto areas where the two sides can fish without causing trouble.