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Sri Lanka will purchase crude oil from Russia after reaching an agreement with Moscow amid the energy crisis spurred by the Middle East conflict, the island nation’s transport minister, Bimal Rathnayake, has said. He stated on Monday (March 6) that “Energy is our priority today.” The US-Israeli war on Iran has triggered a disruption in supplies to Sri Lanka. Russia’s deputy energy minister Andrey Rudenko visited Sri Lanka a few days ago. The deputy foreign minister has also visited Sri Lanka. They reached an agreement on oil supplies to the country. The first crude supplies from Russia are expected in mid-April. Technical work is currently underway at the company level, and financial issues are being discussed, such as how to conduct transactions. But at the political level, almost everything has been done.”
Although Sri Lanka exports tea to Russia, a good logistics system is essential for crude imports. Mayura Neththikumarage, a top Ceylon Petroleum Corporation (Ceypetco) official, said last week that the island nation has only two places where fuel can be unloaded. Ceypetco is the only refiner in Sri Lanka. Neththikumarage has also indicated that fuel shipments for April and May have been secured and that prices might come down marginally in June.
Sri Lanka has endured a serious economic downturn caused by corruption, terrorism, and COVID, and although it is recovering, it still has a rather fragile economic base. Fuel supply problems create additional concerns with fishing vessels, agricultural equipment, and local passenger transport all facing operational difficulties.
Sri Lanka buys most of its crude from the United Arab Emirates (UAE), though refined petroleum products are imported from India and Singapore. In March, Sri Lanka received 38,000 tons of fuel from India. Colombo has hiked fuel prices and imposed rationing to address the supply disruption.
After the Middle East conflict erupted, Russia expressed willingness to be a key energy partner for South Asia, including India, Pakistan, Bangladesh, and Sri Lanka. Bilateral trade between Russia and Sri Lanka currently stands at about US$700 million.
