Sri Lanka may have to buy oil from Russia amid economic crisis, says PM

Ranil Wickremesinghe took over for a sixth time as premier a month ago.

Sri Lanka may have to buy oil from Russia amid economic crisis, says PM

Sri Lanka may be compelled to buy more oil from Russia as the island nation hunts desperately for fuel amid an unprecedented economic crisis, its newly appointed prime minister has said.

Ranil Wickremesinghe said he will look first to other sources, but is open to buying more crude from Moscow. Western nations have largely cut off energy imports from Russia in line with sanctions over its war on Ukraine.

In a wide-ranging interview with The Associated Press on Saturday, Mr Wickremesinghe also indicated he would be willing to accept more financial help from China, despite his country’s mounting debt.

While he acknowledged Sri Lanka’s current predicament is of “its own making”, he said the war in Ukraine is making it even worse – and dire food shortages could continue until 2024. He said Russia has also offered wheat to Sri Lanka.

Mr Wickremesinghe, who is also Sri Lanka’s finance minister, spoke to the AP in his office in the capital Colombo, one day shy of a month after he took over for a sixth time as prime minister.

Ranil Wickremesinghe
Ranil Wickremesinghe took office a month ago (Eranga Jayawardena/AP)

Sri Lanka has amassed $51 billion in foreign debt, but has suspended repayment of nearly $7 billion due this year.

The crushing debt has left the country with no money for basic imports, which means citizens are struggling to access basic necessities such as food, fuel, medicine – even toilet paper and matches.

The shortages have spawned rolling power outages, and people have been forced to wait days for cooking gas and fuel in queues that stretch for miles.

Two weeks ago, the country bought a large shipment of Russian crude to restart its only refinery, the energy minister told reporters.

Mr Wickremesinghe did not comment directly on those reports, and said he does not know whether more orders are in the pipeline. But he said Sri Lanka desperately needs fuel, and is currently trying to get oil and coal from the country’s traditional suppliers in the Middle East.

“If we can get from any other sources, we will get from there,” he said. “Otherwise (we) may have to go to Russia again.”

Officials are negotiating with private suppliers, but Mr Wickremesinghe said one issue they face is that “there is a lot of oil going around which can be sourced back informally to Iran or to Russia”.

Queue at fuel station
People wait in a queue at a fuel station in Colombo, Sri Lanka (Eranga Jayawardena/AP)

Since Russia’s invasion of Ukraine in late February, global oil prices have skyrocketed. While Washington and its allies are trying to cut financial flows supporting Moscow’s war effort, Russia is offering its crude at a steep discount, making it extremely enticing to a number of countries.

Like some other South Asian nations, Sri Lanka has remained neutral on the war in Europe.

Sri Lanka has received and continues to reach out to numerous countries for help — including the most controversial, China, currently the country’s third-largest creditor.

Opposition figures have accused the president and the former prime minister of taking on a slew of Chinese loans for splashy infrastructure projects that have since failed to generate profit, instead adding to the country’s debt.

Critics have also pointed to a beleaguered port in the hometown of then-president Mahinda Rajapaksa, Hambantota, built along with a nearby airport as part of China’s Belt and Road Initiative projects, saying they cost too much and do too little for the economy.

People queue for fuel
Shortages mean long queues for fuel and other essential items across Sri Lanka (Eranga Jayawardena/AP)

The prime minister said his government has been talking with China about restructuring its debts. Beijing had earlier offered to lend the country more money but balked at cutting the debt, possibly out of concern that other borrowers would demand the same relief.

“China has agreed to come in with the other countries to give relief to Sri Lanka, which is a first step,” Mr Wickremesinghe said. “This means they all have to agree (on) how the cuts are to take place and in what manner they should take place.”

Sri Lanka is also seeking financial assistance from the World Food Programme, which may send a team to the country soon, and Mr Wickremesinghe is banking on a bailout package from the International Monetary Fund. But even if approved, he does not expect to see money from the package until October onwards.

Mr Wickremesinghe said: “The Ukraine crisis has impacted our… economic contraction,” he said, adding that he thinks the economy will shrink even further before the country can begin to recoup and rebuild next year.

“I think by the end of the year, you could see the impact in other countries” as well, he said. “There is a global shortage of food. Countries are not exporting food.”

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