$1 B. Iranian credit facility lost;
regained after MR’s intervention


By Shamindra Ferdinando

Rajapaksa meets Ahmadinejad on Sept. 22 in New York

Controversy surrounds the circumstances, in which Sri Lanka recently almost lost $1 billion four-month interest free credit facility it secured from Iran to meet its fuel requirement.

President Mahinda Rajapaksa had to speak with Iranian President Mahmoud Ahmadinejad on the sidelines of the 65th UNGA in New York on Sept. 22, 2010, to regain the credit facility.

Sources told The Island that the Sri Lankan government had failed to respond to an official communication from the National Iranian Oil Corporation (NIOC) seeking to extend the facility, which was to expire on Aug. 31, 2010.

The NIOC ranks as the world’s second largest oil company followed by Saudi Arabia’s state-owned Aramco.

Responding to a query by The Island, sources said that Iran had declined to extend the facility due to Sri Lanka’s lapse prompting President Rajapaksa to intervene. A high ranking government official said thanks to President Rajapaksa’s friendship with the Iranian leader, the facility had been extended without delay.

Iran granted the facility in January 2008, consequent President Rajapaksa’s visit to Iran in November 2007. The initial agreement covered January 2008 to August 31. 2008.

Since then, Iran has extended the facility at Sri Lanka’s request.

Sources said that as Sri Lanka imported fuel in relatively small quantities due to limited storage facilities, it had interest free credit $ 400 to $ 500 million, which could have met some other requirement. Sources revealed that at one point in 2008, Sri Lanka had the facility worth as much as $ 650 million.

Sri Lanka also imports $ 100 million worth fuel from Saudi Arabia.

Sources said that the Iranian credit facility had eased pressure on Sri Lanka’s treasury, at a time Sri Lanka’s war on terror had reached a crucial stage with foreign reserves getting depleted rapidly.

President Ahmadinejad visited Sri Lanka in May 2008 on the invitation of President Rajapaksa and inaugurated the $450-million Uma Oya Hydro Power and Irrigation Project, 85 per cent of which is funded by Iran.

During that visit, President Ahmadinejad also formally inaugurated the $1.47-billion Sapugaskanda Refinery expansion and modernisation project, 70 per cent of which will be funded by Iran.

Sri Lanka also negotiated a $ 2.6 Billion IMF stand-by facility in 2009.

animated gif
Processing Request
Please Wait...