China is determined to enhance its strategic and economic cooperation with India's neighbours and in areas traditionally under India's influence. After Pakistan, Myanmar and Bangladesh, China is getting closer with Sri Lanka. Its recent entry into oil exploration in Sri Lanka, development of port and bunker facilities at Hambantota, strengthening military cooperation and boosting bilateral trade with Colombo are causes of worry to Indian policy makers.

During the recent visit of Sri Lanka's Foreign Minister Mangala Samaraweera to China, both sides agreed to enhance the cooperation on diplomatic fronts. They reaffirmed their opposition to the 'three evil forces' of terrorism, separatism and extremism; and discussed steps to increase coordination in regional and international anti-terrorism activities. It was also decided that the year 2007, which marks the 50th anniversary of the establishment of diplomatic ties between the two countries, would be declared as the Year of China-Sri Lanka Friendship.

Gradually, China is coming closer to Sri Lanka. Recently, Sri Lanka allocated an exploration block, in the Mannar Basin, to China for exploring oil resources. This implies the emergence of Chinese presence a few kilometres away from India's southern tip, causing India strategic discomfort. In economic terms, this would end the monopoly held by Indian oil companies in this area, placing them in competition with the wealthy Chinese oil companies. Chinese is building bunkering facilities and an oil tank farm at Hambantota, the southern coast of Sri Lanka, which will provide service to hundreds of ships traversing the sea-lanes of Sri Lanka for commerce. This adds another vital dimension to its strategic presence in the Indian Ocean, supplementing its projects in Pakistan, Myanmar and Bangladesh.

More than the economic spin-off, Sri Lanka's strategic location has prompted Beijing to develop a strategic relationship with Colombo. Beijing is concerned with the growing US presence in the region and Indo-US naval cooperation in the Indian Ocean. Besides cushioning the impact of Indo-US strategic cooperation in the region, China wishes to enhance its influence over the sea lanes for communication between Europe and East Asia and the oil tanker routes from the Middle East to this region. Its attempts to craft an 'arc of influence' around India are well known. With Pakistan, Myanmar and Bangladesh forming part of this strategic circle, Beijing wants to complete this arc around India by integrating Sri Lanka within it, to curtail India's presence in South Asia and the Indian Ocean region. Sri Lanka is also strategically important to India for its Indian Ocean strategy and for networking its partners in the Indian Ocean Rim Community. The Chinese presence would thwart the Indian Navy, which has to circle the island nation, to transfer its naval fleets between the Bay of Bengal and the Arabian Sea. Besides, military cooperation between Beijing and Colombo, especially to resolve the Sri Lankan ethnic strife, would seriously affect India's stakes in this issue.

India and Sri Lanka have traditionally enjoyed cordial relations. But, India's lethargic neighbourhood policy has created a vacuum, which the Chinese endeavors to fill. Regrettably, India's foreign policy is being dictated by domestic political compulsions, at the cost of India's national security interests. The Sethusamudram project was bogged down by domestic discord and bureaucratic red tape for almost 150 years. It was first conceived in 1860, by a British naval officer, A.D. Taylor, around the same time when work started on the Suez Canal. In the recent past, Sri Lanka has been pressing India for a Defence Cooperation Agreement and requesting its assistance to contain the operations of the LTTE. India, however, has been dithering on account of political compulsions in Tamil Nadu. Sri Lanka believes that stability can be ensured in the island nation with a comprehensive Defence Co-operation Agreement, reached with its large neighbour, committing to safeguard its security interests.

New Delhi needs a strategic partnership with Sri Lanka, in its own national security interests, by a policy of active engagement. If India fails to do this, it would be inviting China to step in. The prospect of China entering a defence cooperation agreement with Colombo would create a nightmare for India's security calculus in the region. Allowing China to complete its arc of influence around India would spell a setback for India's security interests and adversely affect its aspirations of becoming a regional power. India's prospects of permanent membership in the United Nations Security Council also depend on its displaying a greater influence over its neighbourhood.