Sri Lanka Turns to India for Oil Lifeline
IMF Gives Green Light to Oil Subsidiary Plan
LAUGFS GasCrisis: No Laughing Matter Anymore
Is the Government Doomed to Flounder in the Oil Crisis?
The main crisis faced by the government last week was the issue of rising fuel prices. With the United States and Israel launching a war against Iran, the most immediate challenge that emerged overnight—not only for Sri Lanka but for the entire world—was the surge in fuel prices. This became evident within just two or three days after the war began, when the price of a barrel of crude oil in the global market rose above US$100.
The situation worsened when Iran threatened to close the Strait of Hormuz, through which nearly one-fifth of the world’s daily oil consumption is transported, and declared that it would attack all fuel tankers belonging to countries allied with the United States and Israel that pass through the strait. As a result, global crude oil prices climbed close to US$120 per barrel. Not only crude oil but also gas prices were inevitably pushed upward.
Heat is too much
Consequently, by last week, the government led by President Anura Kumara Dissanayake also began to feel the heat of rising oil and gas prices triggered by the Middle East war. One of the key reasons for the concern was that the collapse of the government of former President Gotabaya Rajapaksa had also been triggered by a fuel and gas crisis. In 2021, due to the dollar shortage faced by the Rajapaksa administration, the country did not have the funds required to import fuel and gas shipments. As a result, an overnight shortage of fuel and gas emerged across the country. People were forced to wait in queues stretching for kilometres, spending four to five days and nights in line to obtain fuel and gas.
The outcome was the start of a public protest movement against the Rajapaksa government, which ultimately led to Gotabaya Rajapaksa losing the presidency. It has been only about four years since that protest movement ended. Therefore, the government is well aware that the memory and intensity of that struggle have not yet faded from the minds of the people. After 76 years, it was that very people’s struggle that paved the way for a leftist party such as the Janatha Vimukthi Peramuna (JVP), which once had only around three per cent support, to come to power. For this reason, the government leadership had already realised—within a few days of the war against Iran beginning—that facing a new fuel and gas crisis would be extremely difficult.
Anura Steps In
Accordingly, as last week began, the government led by the President moved quickly to understand the full scope of the looming oil and gas crisis. The President initiated a series of discussions with all parties connected to the issue at the start of the week. The longest rounds of talks were held with officials from the Ministry of Finance and the Ceylon Petroleum Corporation.
By then, the price of a barrel of crude oil in the global market had already exceeded US$100. The consensus among officials was that the government would soon have to confront the fuel and gas problem, and that failure to take immediate steps to manage the situation could lead to a serious crisis. Officials informed the President and senior government leaders that the existing fuel stocks in Sri Lanka were sufficient for about 40 more days. They also noted that payments had already been made for several additional fuel shipments.
High Price
However, officials pointed out that future purchases of fuel would have to be made at the new, higher global market prices. Therefore, they informed the President that fuel and gas would inevitably have to be purchased at these higher prices, which would ultimately require an increase in domestic fuel and gas prices. Otherwise, Sri Lanka could face severe difficulties in securing fuel supplies.
The President then instructed officials to immediately prepare a report comparing current global prices with the prices at which fuel and gas would need to be sold in Sri Lanka. Within a day, officials submitted a report outlining the necessary price adjustments to manage the crisis. According to the report, fuel prices would have to be increased by about Rs. 80 per litre.
President shocked
Many observers noticed the President’s shock upon seeing the proposal. A price hike of such magnitude would be extremely difficult for the public to bear and could trigger a major political crisis. As a result, it was proposed that instead of imposing such a steep increase at once, fuel prices should initially be raised to a level the public could manage, while the government would bear the remaining cost as a subsidy.
Meanwhile, the President also initiated discussions with other international parties connected to the war regarding the emerging fuel crisis in Sri Lanka. During these talks, those parties reportedly indicated that the war could end within about two months. Based on this expectation, the President’s initial plan was to increase fuel prices to a level manageable for the public and then provide a government subsidy for the remaining cost for about three months, depending on the financial capacity of the Treasury.
However, once this decision was made by the government, another issue arose—how the International Monetary Fund (IMF) would respond to the proposal. One of the conditions in the agreement signed with the IMF following the country’s severe economic crisis was that the government should not provide subsidies to the public for any reason. Therefore, the President decided to discuss the matter with IMF officials and seek their approval. If the IMF refused to approve, the government’s only remaining option would be to raise fuel prices by around Rs. 80 per litre.
The IMF Agrees
In light of the emerging situation, the President immediately initiated a round of discussions with officials of the International Monetary Fund (IMF). During the talks, the President pointed out to IMF representatives that the country must be prepared to respond to the situation that was beginning to unfold; otherwise, Sri Lanka could face a serious economic and political crisis.
Accordingly, the President explained that, in the initial stage, it would be appropriate to increase fuel prices to a level that the public could afford and provide a government subsidy for fuel for a period of up to three months. At that time, IMF authorities had already issued a new forecast regarding a possible global economic crisis resulting from the war. As a result, the IMF also agreed to the proposal presented by the President and government officials.
Profitable CPC
Another factor that made it easier for the President to make this decision was the significant profits recorded by the Ceylon Petroleum Corporation (CPC) in recent months. Since domestic fuel prices had been adjusted in line with fluctuations in the global market during the past few months, the corporation had been able to generate considerable profits. Using part of these profits, the CPC had already begun constructing several additional oil storage tanks in locations such as Trincomalee, Sapugaskanda and Muthurajawela. Importantly, these projects were being financed not with funds from the national treasury but with a portion of the profits earned by the corporation in recent months.
The President also informed IMF officials that he had received information suggesting that the war could end within about two months. Therefore, the government would be capable of providing a fuel subsidy for a period of three months if necessary. Following this explanation, IMF officials requested that the government prepare and submit a report detailing the proposed subsidy.
Consequently, officials of the Ministry of Finance immediately began preparing a report outlining how much the government planned to increase fuel prices in the first phase and the amount of subsidy it intended to provide.
Rs 50 increase down to 25
Initially, the proposal was to increase the price of a litre of fuel by Rs. 50 and provide the remaining Rs. 30 as a government subsidy. However, the President did not agree with this proposal. He pointed out to officials that a sudden increase of Rs. 50 per litre for petrol and diesel would be extremely difficult for the public to bear. Such a move would inevitably lead to increases in the prices of other essential goods and services, potentially triggering a serious economic and political crisis in the country.
The President therefore instructed officials to present alternative calculations showing how much subsidy the government would have to bear if fuel prices were increased by smaller amounts. Officials then prepared a report outlining the subsidy costs if fuel prices were increased by Rs. 40, Rs. 30, or Rs. 20 per litre, in addition to the earlier Rs. 50 proposals.
After reviewing the reports, the President concluded that the existing fuel stocks—purchased when global crude oil prices were around US$70 per barrel—would be sufficient for nearly another month. Therefore, instead of imposing a steep increase, he decided that fuel prices should be raised by about Rs. 25 per litre in a manner that would be manageable for the public. However, once the current stocks were exhausted and the next shipments had to be purchased at higher prices, it was also decided that fuel prices might need to be increased again in the second phase.
Strait of Hormuz a Flashpoint?
After deciding on fuel prices, the government faced the next issue: how to respond if Iran were to close the Strait of Hormuz. Iran had already announced that it would take steps to shut down the strait and would not allow even a single drop of oil to pass through it. Through such a move, Iran aimed to exert strong pressure on the United States and Israel, as well as on other countries supporting the war against it.
In this context, it was proposed that if Iran closed the Strait of Hormuz, the next best option for Sri Lanka would be to purchase oil from India. This option became viable partly because India had already begun discussions with US President Donald Trump and American authorities regarding the situation. As a result, Trump had decided to lift sanctions for a period of 30 days that had previously restricted India from obtaining fuel from Russia. This allowed India to resume purchasing crude oil from Russia, as it had done earlier.
Jaishankar’s wisdom
At the same time, Indian External Affairs Minister Dr. S. Jaishankar had initiated discussions with Iranian authorities regarding the crisis that could arise if the Strait of Hormuz were closed. After explaining the potential impact of such a move, Jaishankar reportedly succeeded in persuading Iranian officials not to attack fuel tankers travelling through the strait under the Indian flag. As a result, India became the only country to receive such a concession from Iran. Consequently, India found itself in a unique position during the crisis, with access to oil supplies through multiple channels.
Given this situation, Sri Lankan authorities quickly initiated discussions with Indian officials regarding the purchase of fuel. India informed Sri Lankan authorities that it too was facing serious difficulties due to rising global oil prices and was planning to increase its own domestic fuel prices. However, according to information available to us, India agreed during these discussions to supply Sri Lanka with refined petroleum products.
Indian Oil
Sri Lanka had also proposed purchasing unrefined crude oil, but no agreement was reportedly reached on that matter. Since India is not an oil-producing country, Indian officials informed Sri Lanka that supplying crude oil would be difficult.
In addition, Foreign Minister Vijitha Herath invited the Russian Foreign Minister to his ministry last week and initiated discussions on obtaining crude oil from Russia. According to information received by the “Inside Politics” column, a positive response was received from the Russian side.
Accordingly, the government ultimately decided to purchase oil from India and increase the price of fuel by around Rs. 25 per litre for a period of up to three months, while bearing the remaining Rs. 55 as a subsidy. However, many believe that if the Middle East war continues for more than three months, the entire situation could change dramatically.
If the war drags on for more than three months, significant destruction in the Middle East region would become almost inevitable. Already, Iranian attacks have reportedly targeted oil reserves and storage tanks in several Middle Eastern countries, including Arabia, Oman and Saudi Arabia. If the war continues for such a period, serious damage to global oil reserves could occur. Under such circumstances, crude oil prices in the global market could rise to unbearable levels, and fuel shortages could become unavoidable.
Fuel subsidy
If such a scenario arises, the question would be whether the government could continue to bear the fuel subsidy. The IMF is also closely monitoring the evolving economic situation and would likely oppose extending subsidies beyond the three-month period.
Economic analysts have already informed the government that if the war ends within about eight weeks, as some of the countries involved claim, the situation could be stabilized without major crises. However, if the war lasts longer than eight weeks, experts warn that it is impossible to predict how severe the crisis could become.
The Laugfs Gas Issue
Another problem currently confronting the government is the emerging shortage of gas. This shortage actually began even before the outbreak of the Middle East war. A few months ago, Sri Lankan billionaire businessman Dhammika Perera acquired a 50–50 shareholding in the Laugfs Gas company and brought it into his broader business network.
However, the problem arose because the company failed to import gas stocks as planned and agreed, leading to a shortage within the country. The President had previously addressed this issue in Parliament, stating that discussions had already begun with officials of the relevant company to resolve the matter.
Accordingly, several rounds of discussions took place last week between government leaders and Laugfs Gas authorities. According to information available to the “Inside politics” column, some of these discussions became heated.
Under a Board of Investment project, the Laugfs Gas company had already been allocated about 200 acres of land in Hambantota. The agreement was that imported gas would be stored in gas terminals to be constructed there and used not only for distribution within Sri Lanka but also for re-export. The Board of Investment had also granted several special concessions to the company.
However, because the company had not yet developed the promised gas storage facilities, there were reportedly several tense exchanges during the discussions. According to information available to us, the government has already decided to consider taking serious action regarding the approval granted through the Board of Investment if the company fails to supply gas to Sri Lanka in accordance with the agreed commitments. It is also reported that the President is preparing to make the final decision on the matter.
If such a situation arises, the gas shortage already present in the market could worsen significantly in the coming days.
The Iranian Ship Incident
Another issue the government has had to confront since the outbreak of the Middle East war is the destruction of an Iranian vessel within Sri Lanka’s Exclusive Economic Zone (EEZ). After the incident occurred in Sri Lankan waters, various parties began expressing different views.
US Defense Secretary Pete Hegseth publicly stated that the Iranian vessel had been sunk in an American attack and that a torpedo had been launched from a US submarine. It was reported as the first instance since the Second World War in which a ship had been sunk by a torpedo attack.
The opposition then raised serious questions, asking the government who had granted permission for such an attack to take place within Sri Lanka’s Exclusive Economic Zone, on what basis it had been allowed, and how such authorization had been given. However, the government has not yet provided a clear answer to these questions.
Gore Visit Sri Lanka in May
However, a key development we had been reporting in this column for several months was that a very special relationship was gradually developing between the President and the United States. In particular, when the President travelled to the United States last September to attend the United Nations General Assembly, he held a special meeting with Sergio Gore, the special representative for South and Central Asia under US President Donald Trump and also the US Ambassador to India.
We previously reported that the President and Gore had also held telephone discussions on another occasion. In addition, during the Artificial Intelligence Summit held in New Delhi, the President met Gore again for further talks, during which Gore informed him that he was planning to visit Sri Lanka.
According to the latest information available to us, Gore has now decided to visit Sri Lanka in May. The visit is not merely ceremonial; it is intended to coincide with the transfer of a large US vessel and 10 helicopters to Sri Lanka. These vessels and helicopters are to be provided under a defence cooperation agreement between the United States and Sri Lanka.
Under the first phase of this arrangement, Sri Lanka signed an agreement with the United States in January to receive four coast guard vessels. Of these, three vessels have already been delivered. Gore’s visit in May is expected to coincide with the handover of the remaining vessel along with the 10 helicopters.
Major Show planned
According to reports, the government is planning a major ceremony at the Port of Trincomalee to formally receive the vessel and helicopters. These assets are expected to be used for international maritime operations such as combating drug trafficking, preventing human smuggling and conducting surveillance activities at sea.
A special ship carrying the vessel and the helicopters has already departed from the United States for Sri Lanka. Some of the helicopters, which are to be handed over to the Sri Lanka Air Force, will be stationed at the Anuradhapura Air Force Base, while others will be deployed at the China Bay Air Force Base in Trincomalee. Gore is expected to attend the official ceremony marking the handover.
Boycott Sirasa?
Against this backdrop, political tensions within Sri Lanka intensified further during last week’s International Women’s Day celebrations on March 8. In an earlier issue of the Mawratta newspaper published on March 1, we had revealed that a major political contest was expected to unfold in Colombo on March 8.
At that time, we reported that both the Janatha Vimukthi Peramuna (JVP) and the Samagi Jana Balawegaya (SJB) were preparing to bring women from across the country to Colombo to hold large Women’s Day events. Confirming our earlier prediction, the JVP organised a massive Women’s Day celebration at the P. D. Sirisena Grounds in Colombo with a large turnout of women. The event was attended by President Anura Kumara Dissanayake and Prime Minister Harini Amarasuriya.
successful women’s day
Meanwhile, the SJB held its Women’s Day gathering centred around the Nelum Pokuna Theatre in Colombo. As predicted, the Women’s Day celebrations clearly demonstrated the growing political competition between the JVP and the SJB.
The United National Party (UNP) held a small event at Sirikotha by bringing in a limited number of women, while party leader Ranil Wickremesinghe did not attend. The Sri Lanka Podujana Peramuna (SLPP) also organised a relatively small Women’s Day meeting centred in Matale.
Nelum Pokuna crowded
A particularly noteworthy moment occurred at the SJB event held at Nelum Pokuna. SJB leader Sajith Premadasa had entrusted the final-stage organisation of the event to SJB MP Mujibur Rahman Marikkar and the Samagi Women’s Force. In the days leading up to the meeting, Marikkar coordinated with party organisers, women’s organisations and electoral organisers across districts to bring participants to the event. Marikkar expected the theatre to be filled to capacity, but what he witnessed on Sunday morning when he visited Nelum Pokuna was even more surprising. Although the hall had already been filled with women to capacity, a large crowd had gathered outside trying to enter.
Realising the scale of the turnout, Marikkar immediately called Sajith Premadasa and requested him to delay his arrival slightly so that the situation could be properly managed. Several other MPs and female parliamentarians who were present also contacted Premadasa, asking him to delay his arrival by about half an hour.
Front Gate
At that time, Premadasa was just about to leave home with his wife, Jalani Premadasa, to attend the event. Some participants also suggested that, due to the large crowd gathered at the front entrance, Premadasa should enter the venue through the back entrance of Nelum Pokuna. However, when he sought confirmation, Marikkar and others insisted that he should enter through the main front entrance.
Premadasa himself was eager to see the scale of the gathering, and several MPs even made video calls to show him the packed hall and the crowds waiting outside.
Ultimately, both the JVP and the SJB managed to hold highly successful Women’s Day events, using them as platforms to build momentum for future elections. Regardless of various political statements and media briefings, the events clearly demonstrated that the main electoral contest in the future is likely to be between these two parties.
Tensions with Sirasa Media
Meanwhile, a discussion among senior SJB leaders last week reportedly resulted in a very firm decision regarding the Sirasa television network. For some time, several SJB leaders had been complaining to Sajith Premadasa that Sirasa was deliberately engaging in media coverage that placed him and the party in an unfavorable light.
Although these complaints had been supported by numerous examples, Premadasa had consistently taken a cautious stance. He repeatedly stated that the party should not attack the media, saying:
“Even if they criticise me, it doesn’t matter. We should not attack the media. The SJB is a party that protects media freedom and stands for the rights of journalists.”
Sirasa target Sajith
There were also claims that the Derana television network had been subtly targeting Premadasa and the SJB through its political programme 360. However, Premadasa did not appear to pay much attention to those complaints either.
The situation changed last week following a particular incident. Sirasa reportedly requested that a specific SJB MP be sent to participate in its political programme Satana. Many within the party believed that the channel had deliberately chosen this MP in the hope that he would make statements that could be used to embarrass Premadasa.
After receiving the request, senior SJB members convened a meeting to discuss the matter. Many argued that MPs should not be sent to political programmes simply based on requests from media organisations. Instead, the party itself should decide which representatives would appear.
Experience speakers
The SJB informed Sirasa that one of several experienced speakers from the party—Varuna Rajapaksha, Mahesh Senanayake, Prasad Siriwardena or Charith Abeysinghe—could participate in the programme. However, Sirasa reportedly rejected the suggestion and insisted that the MP they had originally requested should be sent.
During the discussion, SJB MPs also reminded Premadasa about a recent incident in which a former provincial councilor linked to the party had been invited onto a Sirasa programme. According to them, portions of his remarks were edited and broadcast in a manner that embarrassed Premadasa.
Following this discussion, it is understood that SJB leaders informally decided to boycott Sirasa political programmes for the time being. According to reports, the party plans first to quietly avoid participating in Sirasa programmes, and later to inform the public about the reasons behind the decision. They also discussed possible disciplinary action against any MPs who might defy the party’s decision.
However, it is reported that no discussion took place regarding the Derana network during that meeting.
In Sri Lanka, such confrontations between politicians and media organisations are not unusual. Political parties have, at various times, boycotted certain television networks, while media institutions have also been accused of operating according to particular political agendas.
Since coming to power, the current government has also publicly criticised channels such as Hiru and Derana on several occasions. At the same time, those channels have often taken critical positions toward the government. Many observers therefore believe that both politicians and media organisations need to reassess their attitudes toward each other.
Young Voices, Bold Left
A significant political development that did not attract much public attention took place last week. The chairmanship of one of Sri Lanka’s oldest political parties, the Sri Lanka Communist Party, was handed over to a young leader.
Founded in 1943, the Sri Lanka Communist Party’s first chairman was Dr. S. A. Wickremasinghe. From that time until today, the Communist Party has played a major role in helping to form several governments. However, due to the party’s internal rigidity, it has gradually weakened over the years. At one point, a serious internal split also occurred, resulting in the party being divided into two and the formation of the Lanka Sama Samaja Party.
Old leaders
Nevertheless, the same criticism often levelled at many Communist parties was also directed at the Sri Lanka Communist Party. That criticism was that party leaders tend to cling to the top position—the chairmanship—until they grow very old. In the case of the Sri Lanka Communist Party, this criticism was considered valid because its chairman, Dew Gunasekara, remained in the position until the age of 91.
However, this situation changed completely at the party’s 23rd National Congress held in Colombo last week. For the first time in its history, the party’s chairmanship was handed over to a young leader, Matara Weerasumana Weerasinghe.
His name for the position was proposed by none other than Dew Gunasekara himself. Weerasumana was the only Member of Parliament representing the Communist Party during the period from 2020 to 2024. During that time, he carried out his political activities by engaging actively with several major political parties in Sri Lanka. He worked alongside Mahinda Rajapaksa and also maintained political dealings with Wimal Weerawansa. He also played a notable role in several parliamentary committees.
Another special aspect of Weerasumana Weerasinghe becoming chairman of the Communist Party is that the position has once again gone to the Matara District for the second time. The first time the party’s chairmanship went to Matara was when the party’s founding chairman, Dr. S. A. Wickremasinghe, who also hailed from Matara, held the position.
Sajith and Ranil Together
Over the past period, we have revealed a number of internal details in the inside politics column regarding discussions on a possible alliance between the Samagi Jana Balawegaya (SJB) and the United National Party (UNP). In those reports, we provided information about discussions held between Sajith Premadasa and leaders of the UNP, as well as about conspiracies within the UNP aimed at disrupting those talks.
In particular, last week we reported how a strategist within the UNP had been spreading astrological predictions claiming that the government would collapse due to the fuel crisis and the economic crisis, and that Ranil Wickremesinghe would once again return to power.
Discussion continued
Because there had been little public noise about the matter recently, some believed that the discussions on unity between the SJB and the UNP had stalled midway. However, according to the information available to us, that is not the case.
What we report this time is about a special event scheduled to take place on the 20th of this month. The significance of this event is that all the top leaders of both the SJB and the UNP have already decided to participate in it.
March 20th
We are prepared to reveal to the country what this event is as the 20th draws closer. However, we would like to inform all journalists to keep their camera lenses ready for a special photograph that they have long been waiting to capture. Keep your video cameras ready as well.
Several behind-the-scenes discussions have taken place over the past few days regarding this event, and a special individual has also been involved in the process. He is the son of a powerful figure who once made major waves in Sri Lankan politics. It is he who is coordinating the leaders of both parties and planning all the arrangements to bring this event to the stage on the 20th.
Accordingly, we are ready to inform the entire country in due course about this event and the location where it will be held.
In addition, the Inside politics column has learned that another related development is expected to take place a few days earlier. This meeting is said to be scheduled for nighttime at a certain location in Colombo. It is understood that several key leaders connected to both parties will also gather there.
Therefore, it appears that several developments likely to fulfil the hopes of the hundreds of thousands of SJB and UNP supporters who are watching the possibility of unity between the two parties may unfold in the near future.
At the same time, while reporting these positive developments, we will also continue to report on those conspirators who are attempting to sabotage this unity—so that their plots can be defeated and the country can be informed about who these conspirators are. We are also prepared to reveal their names in the near future.
