China and Sri Lanka have come to an agreement about the level of Chinese control over port Hambantota, which is to play an important role on the Silk Road corridor. Commercial operations will be in Chinese hands, while security matters remain under Sri Lankan control.

With its strategic location in the Indian Ocean near the main shipping route from Asia to Europe, the port of Hambantota is crucial to China’s ‘Belt and Road’ initiative, connecting Eurasian countries through land and sea.

However, China’s control of the deep sea facility and a planned adjacent industrial complex have been delayed due to widespread criticism, centered around fears that the port could be used for military purposes.

The agreement

According to Reuters, the Sri Lankan government signed a deal approving of a 1.1 billion dollar (0.9 billion Euros) lease of the port to China on Saturday. The lease was possible after the two governments agreed on revised conditions of the lease. China Merchants Port Holdings will hold 70 per cent of the stakes, rather than the initially agreed 80 per cent.

Further, operations of the port will be split between two companies, with Sri Lanka holding a major stake in the firm dealing with security, while China running the company in charge of commercial operations.

Background

The port of Hambantota has been built by China Merchants Port Holdings for 1.5 billion dollar (1.3 billion Euros). Last year the state-run company signed an agreement taking an 80 per cent stake in the business. It also announced its plans for the development of the 15,000 acres (23 sq miles) next door into an industrial zone next door.

Since this first deal was signed concerned Sri Lankan citizens have taken the streets, calling the deal a loss of land to the Chinese. Sri Lankan opposition parties stressed that national sovereignty was jeopardized. The United States, Japan and India have also expressed their concerns over the ambitions of China in the Indian Ocean.