From Geopolitics to Geoeconomics: Trincomalee’s Transition and India-Sri Lanka Relations

On 22^nd November, Sri Lanka’s Energy Minister, Kumara Jayakody, highlighted the government’s efforts to develop Trincomalee with India. He mentioned that India has proposed a submarine product pipeline to connect both countries, and the latter would also be sending a joint working team to discuss the development of the tank farm in Trincomalee.  This development underscores one of many initiatives that India is undertaking in Trincomalee to make the region central to its connectivity and strategic ambitions. Today, India is focusing on geoeconomics to subtly enhance its economic and security interests, whilst accounting for Sri Lanka’s political sensitivities.

From Geopolitics to Geoeconomics

Trincomalee, located on Sri Lanka's eastern coast, is the world’s fourth-largest natural deep-water harbour. Its location facilitates greater control over the Bay of Bengal region, which made it a vital asset for colonial powers to expand their maritime trade and dominance. The town became a vital garrison point for Britain during World War II, especially with the fall of Singapore to Japan. Britain had also built 100 oil tanks to sustain their fleet, one of which was lost to the Japanese bombings of 1942. With Britain relinquishing its hold over the port in 1957, external players considered establishing a potential naval base in the country.

India expressed interest in developing the region into an energy hub and investing in its socio-economic infrastructure (see Table 1), all while being aware that its extensive involvement, especially in the harbour, could trigger nationalist sentiments.

In 1981, President J.R. Jayewardene proposed leasing the abandoned British-built oil tank farms to the highest bidder, but these plans were eventually dismissed because of India’s concerns. India was also worried about a Voice of America broadcasting station operating in the country and visits by US vessels and aircraft carriers to Trincomalee. Thus, through the 1987 Indo-Lanka Accord, India urged Sri Lanka not to use its territory for activities inimical to India’s security or interests. The Indian Navy started patrolling off the island's eastern coast following the agreement, and the Trincomalee harbour remained critical in India’s Peacekeeping Force (IPKF) operations. To further deter any external player from having a stronger presence, India offered to restore the 99 oil tank farms in Trincomalee.

However, progress remained limited due to the civil war and the negative perception of the 1987 Accord. The Accord is still largely seen as an external imposition. In 2003, Sri Lanka agreed to lease all 99 tanks for 35 years, but progress was slow with the Lanka Indian Oil Corp, a subsidiary of the Indian Oil Corp, operating just 15 of 99 storage tanks. It was only during the latest crisis that India again pushed for modernising the oil tank farms and developing Trincomalee. India expressed interest in developing the region into an energy hub and investing in its socio-economic infrastructure (see Table 1), all while being aware that its extensive involvement, especially in the harbour, could trigger nationalist sentiments.  

Table 1. Indian projects in Trincomalee

Source: Authors’ compilation

Pivot to Geoeconomics and Linkages 

India’s pivot to geoeconomics is a part of its broader strategy to enhance trade, commerce, and connectivity in the region. This serves three purposes: it will further India’s economic growth; push back against China and its increasing presence in the region; help maintain leverage with neighbours and create stability in bilateral relations. In other words, India is creating collective interests by offering interdependencies and market access. Thus, working with India or against it has benefits and costs, respectively, through market access and development cooperation. This leverage will also create predictability and stability in ties, regardless of who is in power. As such, India sees connectivity and interdependence with Sri Lanka via Trincomalee as a means to subtly enhance its economic and security interests, especially as the Indian Ocean witnesses increasing competition.

The presence of a third country and the bi-directional flow of petroleum products will help circumvent concerns about Indian hegemony in Sri Lanka’s hydrocarbon sector.

One such major push is seen with the development of the oil farm. Following the economic crisis, both countries have formally agreed to develop 61 tanks in a joint venture; the remaining 24 will be run by Sri Lanka’s Ceylon Petroleum Corporation. India will also be sending a joint working team to discuss the development of the tank farm in Trincomalee. This will be supplemented with an undersea bi-directional pipeline, which will carry an estimated 3.5 million tonnes per annum of oil or petroleum. This would allow products to move both ways, linking Sri Lanka’s needs to India’s refinery network and creating interdependence. The UAE has also expressed interest in exploring more business opportunities and establishing a multi-product pipeline. The presence of a third country and the bi-directional flow of petroleum products will help circumvent concerns about Indian hegemony in Sri Lanka’s hydrocarbon sector.

For Sri Lanka, Trincomalee’s strategic location between the East-West shipping lane could help it become a key strategic hydrocarbon reserve in the Indian Ocean Region. India’s partnership is thus necessary for trading these reserves. Trincomalee, located approximately 270 nautical miles from Chennai, is an ideal node that connects Sri Lanka’s energy and infrastructural demands with India’s refineries in Nagapattinam and Ennore. Furthermore, India and Sri Lanka are discussing energy-grid connectivity. In April 2025, the two countries also laid the ground for the construction of the Sampur Solar Power Project in the district. This 50:50 joint venture between the Ceylon Electricity Board and NTPC Limited aims to achieve a solar capacity of 120 MW, starting with an initial goal of 50 MW.

Lastly, in April 2025, India and Sri Lanka signed an MoU on Multi-sectoral Grant Assistance for the Eastern Province. India will provide around US$8 million to Sri Lanka for 33 development projects in the education, health, and agriculture sectors, highlighting New Delhi's commitment to enhancing the district’s socio-economic development. These initiatives, together with the development of the energy sector, will help the region with the necessary backward linkages to revive its economy and offer basic and social infrastructure.

Prospects and Challenges

The latest commitments show that the port itself is not the immediate focus of India’s renewed engagement. This is largely to avoid triggering nationalist sentiments in the country. The focus is on building economic interdependence through backward linkages that can transform the region’s strategic and commercial landscape. As these linkages mature and if their benefits become widely shared, they would pave the way for the potential development of the port.

The focus is on building economic interdependence through backward linkages that can transform the region’s strategic and commercial landscape.

India’s optimism for Trincomalee also coincides with forecasts of steady growth of commodity traffic across various sectors (see Table 2). This underscores its emergence as a commercial hub rather than a peripheral port or a mere counter to Chinese influence in Hambantota and Colombo. These trends reveal the port’s potential to anchor new supply chains that link Sri Lankan exports and logistics to India’s eastern industrial corridor. Thus, India’s model appears as a rationale and strategic alternative to China’s debt-heavy footprint. Unlike Hambantota, where Chinese projects have been accused of creating debt swaps and asymmetric dependence, India’s focus is on embedding Sri Lanka into its production networks, turning asymmetric ties into interdependence.

Table 2. Forecasts of Trincomalee Harbour

Source: Trincomalee Port Development Plan | March 2019, Asian Development Bank

Yet, ambitions to form backward linkages face considerable headwinds. Ethnic tensions continue to persist in the region. Furthermore, Colombo’s protected economy has made industries resistant to external integration and has slowed project approvals and cooperation. Moreover, Sri Lanka’s record of politicisation, nationalism, and cancellation of projects, as seen recently with the projects in Mannar and Pooneryn, will set a negative precedent. India-Sri Lanka cooperation with a third country, be it with the US, Japan, or Russia, has had a history of faltering. Therefore, India will be wary of this challenge while aiming for success in the UAE trilateral.

Trincomalee stands as more than a port or a visible geopolitical asset today. For India, it represents an opportunity to turn proximity into partnership and subtly enhance its presence in the strategic region; for Sri Lanka, a chance for recovery. Sri Lanka’s economic crisis has created an opportunity for cooperative rebuilding, and India’s careful balancing of regional leadership ambitions with sensitivity for Sri Lanka’s domestic politics could set a precedent for cooperative regionalism. But with Beijing’s growing foothold in the Indian Ocean, it would be interesting to see how long New Delhi and Colombo can continue to focus just on the backward linkages in the Trincomalee region.

Aditya Gowdara Shivamurthy is an Associate Fellow with the Strategic Studies Programme's Neighbourhood Studies Initiative, Observer Research Foundation.

Uditi Lunawat is a Research Intern with the Observer Research Foundation.

• International Affairs
• India
• Neighbourhood
• Sri Lanka
• India–Sri Lanka relations
• Indo-Lanka Accord
• Sampur Solar Power Project
• Sri Lanka economic crisis
• UAE trilateral cooperation

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