The sight of over a dozen Iranian oil tankers gathered off the Sri Lankan coast, together with the sinking of an Iranian vessel by a United States submarine in March, has once again placed the nation at the centre of a geopolitical crisis far beyond its shores. More importantly, it has highlighted something Sri Lanka has too often taken for granted: its geography.
The island sits astride some of the world’s busiest sea lanes. Throughout history, its location has given Sri Lanka a strategic importance disproportionate to its size. The Portuguese, Dutch, and British understood this. During the Second World War, Admiral Lord Louis Mountbatten established his South East Asia Command headquarters in erstwhile Ceylon. The island also played a crucial role in maintaining Allied communications and supply lines across the Indian Ocean.
One of the most remarkable reminders of that role was the famous “Double Sunrise” service. From 1943, Qantas Catalina flying boats operated between Australia and Sri Lanka, maintaining an air link after the fall of Singapore. The flights were so long that crews and passengers saw two sunrises. As the 83rd anniversary of the service is commemorated, it is worth recalling that Sri Lanka once served as an indispensable logistical link across the Indian Ocean.
The question is whether the country can do so again.
What Sri Lanka lacks
Sri Lanka today possesses three extraordinary maritime assets. Colombo has become one of the world’s important transhipment centres, handling around 90 lakh TEUs a year, with a substantial share of its transhipment business connected to India. Trincomalee possesses one of the world’s greatest natural harbours, with enormous potential for energy, storage, and industrial development. Hambantota is close to the main east-west maritime routes and offers land and deep-water capacity for industries that cannot easily be accommodated around Colombo.
Together, these assets could form the foundation of something much larger: a logistics and energy hub in the Indian subcontinent comparable in concept, if not scale, to Rotterdam, Singapore, or Dubai.
Yet, Sri Lanka has never fully realised this potential.
Since independence, development has too often proceeded in fits and starts, driven by individual projects rather than a sustained national strategy. The country’s 30-year war was another major impediment. It diverted resources, discouraged investment, and made long-term infrastructure planning and development far more difficult.
But the war is over. Today, there are no comparable excuses. In the years since 2009, Sri Lanka has not lacked strategic geography. It has lacked the political will and continuity to convert geography into economic power.
That must now change. The international environment has offered the island an opportunity that may not come again.
The disruption surrounding the Strait of Hormuz and the wider Middle East is likely to accelerate the search for alternative logistics, energy, and supply-chain arrangements. Countries and companies are increasingly looking not simply for the cheapest routes, but for resilient and trusted ones.
This creates a potential space between the established hubs of the Gulf and Southeast Asia in which Sri Lanka could play a greater role.
But if Sri Lanka does not move, India will inevitably develop alternatives of its own.
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A fundamental rethink
It would be a mistake to view India’s expanding maritime infrastructure simply as competition. Instead, it presents an opportunity for Sri Lanka to integrate into a much larger logistics ecosystem. Colombo and Trincomalee should become complementary to India’s ports rather than just competing with them.
This calls for a fundamental change in thinking.
Colombo needs further expansion, including new breakwaters, terminals, and efficient inter-terminal and hinterland connectivity. If Sri Lanka is to become a genuine multimodal hub, the airport too needs a major expansion, including a second runway.
There is also an opportunity to rethink Colombo’s role as an aviation gateway to India. Under such an arrangement, Indian customs and immigration facilities could operate at Colombo airport, along the lines of arrangements at international airports elsewhere, making travel and onward connectivity more seamless. Such an arrangement would require detailed negotiations between the two governments, but the strategic objective must be clear: Colombo should function increasingly as an extension of the economic space in the Indian subcontinent and the Middle East.
Sri Lankan Airlines must be privatised without further delay and placed with a strategic airline investor capable of developing Colombo as an aviation hub for the Indian subcontinent and the Middle East. A national airline cannot be an end in itself; connectivity comes first.
Trincomalee should become the centre of an integrated energy strategy. Its oil-storage capacity could be expanded and connected to India. The oil pipeline proposal now under discussion involving India, Sri Lanka, and the United Arab Emirates (UAE) could become an important example of how the island’s strategic location can facilitate trilateral cooperation. Refining, petrochemical, and other energy-storage possibilities should also be examined.
The electricity connectivity discussions now taking place between India and Sri Lanka must be implemented quickly. Combined with large-scale investment in the island’s wind and solar resources, such connectivity could transform Sri Lanka from an energy importer into an important regional producer of renewable electricity. Green hydrogen could eventually become part of this strategy.
Sri Lanka’s mineral resources, including graphite, ilmenite, and phosphate, also need to be incorporated into this broader strategic vision.
The Japanese proposal for an India-Sri Lanka export-oriented industrial corridor provides another opportunity. Rather than a simple industrial development project, it could become a model trilateral initiative between India, Japan, and Sri Lanka, linking Japanese technology and investment, India’s enormous market and manufacturing capabilities, and Sri Lanka’s strategic location and connectivity.
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India must win Sri Lanka over
Ultimately, the boldest step would be physical connectivity between India and Sri Lanka.
A road and rail connection across the Palk Strait would be politically sensitive and would require careful consideration of environmental concerns. But if designed appropriately, it could become the ultimate catalyst for Sri Lanka’s transformation into a regional logistics and manufacturing platform.
This would also symbolise a larger change, from thinking of Sri Lanka and India as two economies separated by a narrow stretch of water to seeing them as interconnected components of a larger economic system extending across the subcontinent, toward the Middle East and beyond.
There are precedents.
After the Second World War, the Netherlands made a strategic decision to build itself into Europe’s distribution and logistics centre. Rotterdam port and Amsterdam airport became the physical expressions of that decision. Singapore’s leaders similarly recognised that the city-state’s survival depended upon turning geography into an economic asset. The UAE later pursued a comparable strategy, transforming Dubai into a global centre for trade, aviation, logistics, and finance.
None of these transformations occurred automatically. They required political will, consistency, foreign investment, infrastructure, and, above all, a national decision about what the country wanted to become.
Sri Lanka faces a similar choice.
The current crisis in the Middle East should therefore not be viewed solely through the narrow lens of immediate security risks. It is also a warning about the vulnerability of global supply chains and an opportunity to rethink the architecture of the Indian Ocean.
The post-Hormuz world may be more fragmented and multipolar. That makes trusted regional partnerships all the more important.
For Sri Lanka, the most important of those partnerships will inevitably be with India. No ambitious strategy for the island can succeed without Indian confidence. Equally, India has an interest in a stable, prosperous, and economically integrated Sri Lanka located immediately across its southern maritime approaches.
Trust, however, cannot be assumed. India too will need to win the confidence of Sri Lankan sceptics. This will require sensitivity, patience, and a willingness to address Sri Lankan concerns gently—not cold economic logic. The success of deeper integration will depend as much on political and people-to-people trust as on ports, pipelines, and railways.
The Iranian tankers now lying off Sri Lanka are a dramatic reminder of the island’s location. Eight decades after the Double Sunrise flights connected Australia and Ceylon across the Indian Ocean, Sri Lanka again finds itself at the intersection of major global currents.
The choice is whether to remain a strategically located island or become the strategic hub that its geography has always made possible. The post-Hormuz period may be Sri Lanka’s last great opportunity to make that choice.
Milinda Moragoda is a former Cabinet minister and diplomat from Sri Lanka and founder of the Pathfinder Foundation, a strategic affairs think tank. He is on X @MilindaMoragoda. Views are personal.
(Edited by Prasanna Bachchhav)
A very modest proposal would be for the Indian Rupee to be widely accepted in Sri Lanka.