According to the latest information, “following an agreement between the two parties, the Chinese company and Sri Lanka, the court order has been suspended and the People’s Bank has released the dollars for the corresponding payments”. The Banque Populaire was removed from the blacklist as a result”. The problem was that tested samples confirmed that the fertilizer imported from China contained harmful bacteria in the soil, and the stock of fertilizer was returned. However, Sri Lanka had to pay $6.9 million for fertilizer imports. In short, a Sino-Sri Lankan dispute over fertilizers ended in favor of China.
Just a month ago, Agriculture Minister Mahindnanda Aluthgamage said the shipment of Chinese organic fertilizers would not be accepted and that Sri Lanka would not make any payment for the shipment. Sri Lanka was forced to move away from this position. We cannot afford to harm diplomatic relations on this issue,” Aluthgamage said explaining the government’s about-face.
The context
The Chinese ship “Hippo Spirit” – left China in September 2021 carrying 20,000 tonnes of much needed organic fertilizer to Colombo. The order was placed after the Sri Lankan government suddenly stopped all imports of chemical fertilizers in May to convert the country into the world’s first all-organic farming nation. This was the first delivery of Colombo’s plans to purchase 99,000 tons of organic fertilizer from a Chinese company at a cost of $49.7 million. The problem is the quality of the fertilizer – which scientists say, instead of helping, could prove harmful to Sri Lankan crops. They insist that since the shipment has implications for the country’s biosecurity, it cannot be accepted.
Colombo rejected the shipment on the grounds that the samples contained deadly bacteria called Erwinia that destroy cultures. The Chinese company in turn denied sending contaminated fertilizer and specified the production process. This is exported not only to Sri Lanka but to fifty other countries including the United States, Germany, Spain, Italy, Australia and New Zealand.
Through its lawyers, the Chinese company had threatened legal action against the department, demanding $8 million from WART Wickramaarachchi, the additional director of the National Plant Quarantine Services, as compensation for the wrongful accusations and attacks on his international reputation.
Chinese response
“The Sri Lankan Ministry of Agriculture has backtracked and has no sincerity in solving the problem; therefore, companies can only use judicial and arbitration channels. Despite the Embassy’s joint efforts to promote the resolution of the dispute by guiding and assisting companies to resolve the issue, as well as communicating with the Sri Lankan Ministry of Commerce, Ministry of Agriculture and other relevant departments, the issue remains unresolved, the Chinese Embassy in Sri Lanka said, expressing hope that the issue can be satisfactorily resolved as soon as possible.
A war of words ensued and was followed by tit-for-tat actions.
“The unscientific detection method and conclusion” of the National Plant Quarantine Service (NPQS) of Sri Lanka “does not comply with the international convention on animal and plant quarantine,” Qingdao Seawin said in a statement. He accused the NPQS of also “irresponsibly conveying false, even controversial, remarks in the media.” The Chinese company also slammed the media for using “derogatory words” like “toxic, garbage, pollution” to describe the fertilizer shipment. This was intended to “seriously defame[ing] image of Chinese companies and the Chinese government,” he said.
In subsequent discussions with the Sri Lankan Ministry of Agriculture, Qingdao Seawin laid down several conditions to resolve the dispute. Sri Lanka should pay 70% of the price agreed in the original bidding agreement and additional freight charges, he said clearly, Qingdao Seawin did not want controversy over the quality of his shipment to Sri Lanka has an impact on its trade with more than 50 countries. , including the United States
If Chinese pressure forced Colombo to buckle down with a toxic shipment of organic fertilizers, massive protests from farmers forced the government to reverse its fertilizer policy. Even as China emerged victorious from its feud with Sri Lanka over the organic fertilizer controversy, the Rajapaksa government partially lifted the ban on chemical fertilizers.
The People’s Bank had to make a payment of over US$42 million to China. The Chinese Embassy in Colombo tweeted the blacklist.
Sri Lankan authorities had recently turned away a Chinese ship with 20,000 tonnes of fertilizer, due to harmful bacteria in the October cargo. Chinese authorities have defended the high quality of their exports from Quingdao Seawin Biotech Company. Surprisingly, the same ship, “Hippo-Spirit”, was renamed “Seiyo Explorer” and rejoined with the same shipment in November. The vessel disabled its automatic identification system (AIS) and renamed itself in the open sea. China was using its influence to have the contaminated fertilizer cargo unloaded on the island, regardless of the release.
The extent to which China would move from blacklisting the bank to renaming the ship shows China’s significant “push” factor and paints a picture of the apparent weakness in Sri Lankan institutional capacity – as the Ministry of Foreign Affairs – to defend the blacklisted local bank and pressure China to adhere to local test data. The Chinese want to have the fertilizer evaluated by a third party, which again undermines Sri Lankan expertise. China’s ability to maneuver supply chains is exemplified by this case, where Sri Lanka has been pressured and victimized by its heavy reliance on Chinese loans.
China is changing the rulebook and standards to suit and pressure local policy makers in countries like Sri Lanka. The significant growth of Chinese agency vis-à-vis Sri Lankan elites, government institutions and media space was labeled as “high risk” by a recent comprehensive report on China’s influence in South Asia: Vulnerabilities and Resilience in Four Countries by the Carnegie Endowment. Growing public unrest over Chinese loans is a strong indicator of this development. The report aptly highlights the “high risk” Sri Lanka faces in China when it comes to the potential capture of “influential elites and key individuals in Sri Lanka’s vibrant and robust media, as an alternative to politicians to get their point across to the public”. . The report further states that “the issue of elites captured or captureable by China is more relevant in Sri Lanka than in Bangladesh.”
Opposition party demonstrations
Samagi Jana Balavegaya opposition MP Rohini Kaviratne pointed out that although the Maha season is underway, farmers have yet to receive the promised fertilizer. Government politicians would not be able to visit agricultural regions, MP Kaviratne said, adding that the foolish government had ruined the Maha season. The MP said China’s action against the People’s Bank over the stopping of payments by the High Court of Commerce in Colombo was an extremely serious matter.
Indian aid
In early November 2021, India came to the rescue of Sri Lanka by airlifting 100,000 kg of liquid nano-nitrogen for urgent distribution to farmers protesting the government’s failure to provide needed fertilizers and agrochemicals.
Two Indian Air Force Globe captains have arrived at Bandaranaike International Airport (BIA) in perhaps one of the biggest, if not the biggest airlift ever by an Air Force stranger here. Sri Lankan Airlines airlifted the first shipment on October 21.
The Indian High Commission spokesperson said the deployment was mainly to support Sri Lanka’s initiative for organic agriculture and to accelerate the availability of nano nitrogen fertilizers for the farming community as reported the Island newspaper.
“The Government of India has continued to support Sri Lanka in times of critical need under its ‘neighborhood first’ policy and has repeatedly demonstrated its capability and role as a ‘first responder’ in the region.”
Sri Lanka is so deeply rooted in Chinese debt that it is said to be in a Chinese debt trap. Importantly, Beijing has repeatedly defended Sri Lanka against censorship at global human rights forums.
However, Sri Lanka and China were unable to resolve the crisis as the former released 20,000 metric tons of carbon dioxide fertilizer following an unfavorable test report from the national quarantine services. Sources said the issue had put a hold on the decision to purchase 99,000 metric tons of carbon dioxide fertilizer from China.
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