The unprecedented Iranian assistance to execute a project to boost the capacity of Sapugaskanda oil refinery would meet a long standing demand of petroleum workers, trade unionists said.

In fact, it had been among the set of demands recently forwarded by unions to the government when they called a countrywide strike in the petroleum sector on March 19.

"The Iranian assistance is timely," a union spokesperson said, asserting that the upgrading of the over four-decade old facility would reverse controversial efforts spearheaded by a section of the government to dilute the State hand in the lucrative petroleum sector. He said this was a real victory as the country celebrated the May Day.

Subsequent to a workers’ threat to strike on March 19 the government promised to meet some of their demands including the upgrading of Sapugaskanda oil refinery. The project would make Sri Lanka self-sufficient in aviation fuel and bitumen. The project envisages increasing the daily output capacity of 50,000 barrels to 150,000 barrels of refined oil.

The JVP spearheaded the campaign with the support of members of other unions affiliated to the UNP and SLFP.

Iran would contribute approximately USD 900 million for the project, an authoritative official said on Wednesday. According to him the Sapugaskanda project was one of the three major components of the pact between Sri Lanka and Iran. President Mahinda Rajapaksa had first called for Iranian assistance for the Sapugaskanda project when he met with Iranian President Mahmoud Ahmadinejad during the UN summit in New York in September, 2006.

Iran would also provide USD 400 million to implement the Uma Oya multi purpose irrigation project, government sources said. The sources said the Sri Lankan government, too, would meet part of the expenditure of both the Sapugaskanda and Uma Oya projects.

But perhaps the most important would be what a diplomatic source called a revolving credit facility to purchase crude oil from Iran, Sri Lanka’s major supplier. "It is an exclusive arrangement and to Sri Lanka’s immense advantage," he said. The bottom line is that the four-month credit facility was worth USD 700 million and altogether the Iranian assistance would be over USD 2 billion. Fielding questions, the official categorized the funding for Sapugaskanda and Uma Oya projects as soft loans.

Iranian President Mahmoud Ahmadinejad’s recently concluded visit to Colombo as Iran extended its energy ties in South Asia, marked a new phase of the growing relationship between the Sri Lanka and Iran. In fact this wouldn’t have been a reality against the backdrop of Sri Lanka’s vote against Iran at the International Atomic Energy Agency (IAEA) in 2006 over Iran’s hotly disputed nuclear programme. India, too, voted against Iran.

Sri Lanka’s Ambassador M. M. Zuhair, PC, is widely believed to have played a critical role in restoring Iran-Sri Lanka ties after he took over the assignment in Tehran. The Island learns that Treasury Chief Dr. P. B. Jayasundera, too, has pushed for the Iranian assistance with Zuhair, a political appointee with absolutely no previous experience in international diplomacy, clinching the deal. Iran’s top diplomat in Colombo, too, has played an important role in the swift restoration of ties.

The Iranian President, following his meeting with President Rajapaksa, asserted that they could expand their relationship beyond the recently launched projects.