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12 Jun, 2022 10:10

Debt-laden Sri Lanka eyes discounted Russian oil

The country is struggling with simultaneous fuel and food crises
Debt-laden Sri Lanka eyes discounted Russian oil

Sri Lanka may start buying oil from Russia amid a critical fuel shortage and an unprecedented economic crisis, Prime Minister Ranil Wickremesinghe said in an interview with the AP news agency, published on Sunday.

According to Wickremesinghe, Sri Lanka would first look to other sources to get the much-needed fuel, for instance, to its major suppliers in the Middle East.

Certainly, we are looking at the Gulf as our main supply… If we can get [oil] from any other sources, we will get from there. Otherwise, we may have to go to Russia again,” he stated.

According to the country’s energy minister, last month Sri Lanka already bought a 90,000-metric-ton shipment of Russian crude to restart its oil refinery. While Wickremesinghe did not comment on this purchase, and said he had no information about whether more orders were agreed upon, he stressed that his country needs fuel desperately and immediately.

He also said that “there is a lot of oil going around which can be sourced back informally to Iran or to Russia,” adding that “sometimes we may not know what oil we are buying.”

After the launch of the military operation in Ukraine in late February, many Western states have been trying to cut financial flows to Russia, including through embargoing or reducing imports of Russian energy.

Moscow has offered a large discount on its oil to attract potential buyers and make up for the losses. Countries such as China and India have taken advantage of this and increased purchases over the past several weeks.

However, such a situation has sparked fears about the future of Russian energy exports and propelled prices higher globally on everything from oil and gas to food.
Sri Lanka has remained neutral on Russia’s operation in Ukraine. However, Wickremesinghe noted that its impact on the global market has made the already critical conditions in his country even worse. He predicted that food shortages may continue through 2024. The PM added that Russia had offered wheat to Sri Lanka but did not disclose any details on the matter.

Sri Lanka is in the grip of its worst economic crisis since the country declared independence back in 1948. The crisis was triggered by a shortage of foreign currency resulting from the restriction of tourism due to the Covid-19 pandemic. As a result, the country does not have the funds to pay for imports, and is struggling with an acute shortage of fuel, food and basic necessities.

This was further exacerbated in mid-April, when Sri Lanka defaulted on its external debt, which effectively made it ineligible to borrow foreign funds further. Its debt is estimated at $51 billion. A restructuring under an economic adjustment program supported by the International Monetary Fund (IMF) is currently pending.

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