Features

ARE SRI LANKA’S DEBTS “ODIOUS”?

Published

4 years ago

2022/05/29

Sahan Weerasooriya

by M. Sornarajah

Emeritus Professor of Law

National University of Singapore

The economic crisis in Sri Lanka is due to massive borrowings by recent governments of the country. It is true that external factors, like the covid pandemic and, later, the war on Ukraine, contributed to the crisis but inability to service the loans was the primary and immediate cause of the economic crisis. The policies of the government like the reduction in taxation of high earners, the mismanagement of the covid pandemic and the banning of chemical fertilisers contributed to the situation. These were factors that operated on the primary cause, the unsustainable debts that had been incurred for purposes which lacked a clear public benefit and were tainted by corruption. Repayment of interests on the loans depleted the dollar resources of the state.

Sri Lanka now lacks resources to service the loans. The government has declared that it has no more than 50 million dollars in its coffers. That is less than the personal wealth of our corrupt politicians. Some arguments must be found for rescheduling the debts. Among them are the lack of public utility of the debts, the lack of transparency in the loan transactions, excess of authority of public officials negotiating the loan, the unfavourable interest rates and the complicity of the lender in making the tainted transactions. These reasons are encapsulated in the legal doctrine on “odious debts.” This article examines the possible application of the doctrine of odious debts to the debt obligations of Sri Lanka.

The restructuring of the existing debts so as to make repayments easier is necessary to ease the debt burdens of the country. In negotiating such restructuring, it is relevant to discuss whether the original purposes of the debts and the circumstances of their negotiations impact on the fairness of the debt obligations. A sovereign debt is unlike a commercial debt. A commercial debt is negotiated between private parties. The transaction is between the lender, usually a bank and a private person. The private person seeks the debt for a purpose of his own and the parties agree on terms relating to interest and repayment. The loan transaction is subject to the normal principles of contract law. Even in such private transactions, domestic legal systems are beginning to question the fairness of the terms of the loan.

The debt obligation of a sovereign state is different. For one, the sums involved in a sovereign loan is very large, unlike in private commercial transactions. The debt is negotiated between the government of the state through its officials with a foreign state or a foreign bank in order to serve the interest of a third party, the public of the state. It is the existence of this public interest that gives legitimacy to the debt obligation. Where that public interest is lacking, doctrine has it that the sovereign debt is an odious debt, particularly in the situations where the lender knew that the loan was tainted by an absence of public interest or corruption.

Creditor complicity in the taint exists where the creditor lent the money in order to achieve a purpose of its own, such as securing a political advantage or securing high interest rates using the ignorance of the sovereign borrower. The debt becomes odious also where the creditor is aware of the widespread culture of corruption in the state. The instances where the lender pushes the loans for securing monetary or political advantages for itself are regarded as instances of “predatory lending”, the existence of which supports a finding of an odious debt.

The doctrine of odious debts in international law casts doubt on the validity of debt obligations created by a government when it appears that the debt was not to be used and was not used for a project that benefited the people. In terms of Sri Lankan domestic law, the ministers or public officials who negotiate loans knowing that the public interest in the loan is non-existent or slim, exceed their bounds of authority. The sovereign loan, being an administrative transaction located in public law, would be treated as invalid due to excess of authority. The soundness of the premises on which the doctrine is based is unassailable.

The policy purpose of the doctrine is admirable in that it deters lending to states with corrupt leaders. It raises the question also as to whether lending states should use sovereign debts as instruments of diplomacy to further their influence with the state or the region. The legitimacy of a debt made to an authoritarian government by a lender who sought to cultivate a special relationship with a regime is an irksome idea. Why should such a debt be passed on to a later democratic government? Why should the people of the state have to bear the debt burden which is not to their advantage?

There are human rights issues that arise as well. The example of Sri Lanka indicates that such debts result in an increasing unavailability of the essentials of life, like medicines, electricity, cooking gas, transport, hospital facilities and schooling for children. They result in hunger and increase poverty. They implicate the violation of human rights such as the right to life. Such loans come into conflict with fundamental norms of international law and must be considered invalid on that count.

The debts that have been incurred by the Sri Lankan governments in the last few years do have hallmarks of odious debts. They were debts incurred by a government that the people allege was steeped in corruption. It is alleged that a part of the loans found their way into the pockets of ministers and public officials who negotiated the loan. Many of them lacked a public purpose, were not negotiated transparently and served the political interests of leaders of the borrowing state and the foreign policy interests of the lending state.

Many of the projects for which Sri Lanka sought loans lacked an overt public purpose. Many were projects which were objected to on grounds of feasibility, the harm they could cause the environment or the lack of potential to earn revenue. True it is that some projects involved the building of infrastructure such as roads and bridges but the raising of the loan as well as the tendering processes in these projects involved heavy corruption. The popular belief is that more than 10 percent of the sums involved in every government project found its way into the personal coffers of a particular minister. There are many projects that the public readily associate with corruption because of their obvious lack of utility to the public despite the high costs involved in their construction.

The megaprojects for which loans were granted have some common features. They are named after President Mahinda Rajapaksa, indicating that they were often vanity projects designed to keep the President’s name for posterity. Each one of them has been referred to as a white elephant in both the local and the international press. There was considerable local opposition to their construction. Besides the other common features, they were usually located in the Hambantota District, the native area of the Rajapaksa family. These debts were given by Chinese development banks which were influenced by the Chinese policy of securing a foothold in Sri Lanka. The projects so overtly lacked public interest that the lender should have known that the loans were tainted.

Many of the loans were raised in the context of a new foreign policy initiated by President Mahinda Rajapaksa. There was a tilt in foreign policy towards China. China itself was fast rising as an economic power. China was keen to establish links with Indian Ocean States. Sri Lanka provided strategic advantages in securing a foothold in the Indian Ocean. China also began a Belt Road Initiative, the object of which was to restore Chinese influence along the old land-based silk route as well as the maritime routes that the Chinese Admiral Zheng He had used in the fifteenth century. (It is a matter of our history that the Chinese Admiral visited our island on two occasions. He captured one of our kings, Alekeswara, and took him to China as a hostage. A regime change resulted. (See The Island, 31.05.2021 on the “Trilingual Inscription on the Galle Stela”. The inscribed stone left behind by the Admiral was found in Galle. It is kept in the National Museum.) Recovering the past influence was an object of the BRI in the context of which China is said to pursue a policy based on loans to the countries of the BRI region. If so, there was a political objective behind the giving of these loans.

Several loans were given by the Chinese Exim Bank. The Export-Import Bank of China is chartered to implement the policies of the Chinese state in the areas of international trade, industry and foreign aid. It was a principal source of loans to several projects in Sri Lanka. The Magampura Mahinda Rajapaksa Port (Hambantota Port) was built with large loans given by the bank. The economic feasibility of the Port is suspect. As a result of problems in the repayment of loans, a 99-year old lease was given to a joint venture company in which a Chinese state corporation had 80 percent of the shares. There was a lack of transparency in the transaction.

The Mattala Rajapaksa International Airport was also built with loans from China. It was described by Forbes Magazine as the “world’s emptiest airport”. It provides a home for wildlife in the area and was used for storage of rice. The Mahinda Rajapaksa International Cricket Stadium is another white elephant built near Hambantota. It cannot attract sufficient spectators to make playing international matches there viable. The Stadium was built by the Sri Lankan cricket authorities though a Chinese company which is owed money for its construction. The Lotus Tower sticks out like a thumb in the Colombo skyline. It was built with loans. It is difficult to discover a public interest in its construction.

The Nelum Pokuna Mahinda Rajapakse Theatre was built to resemble the Nelum Pokuna in Polonoruwa, built by Parakramabahu The Great in the twelfth century. It was built with borrowed money. There is also the building of the DA Rajapaksa Museum concerning which a case is pending. These projects could not have promoted public welfare. The loans to construct them must be regarded as odious debts.

Other projects connected with Hambantota, like the Southern Expressway (on which I recently drove comfortably from Colombo to Kataragama), though little used due to high tariffs, do have public utility. The same would apply to the improvement of road networks under the Rajapaksa regime. Though their construction involved much corruption, they were useful to the public. To the extent that the odious debt doctrine may have partial application, the doctrine may affect these projects as well.

Much is made in newspapers about the Chinese debt trap. There does not seem to be a case for that. But, there seems to have been an eagerness to court the Rajapaksas and give loans for unwise projects. There may also have been a need to show the success of the Belt Road Initiative behind the making of these loans.

China has used the odious debt doctrine in the past to deny its debt obligations. Immediately after the success of the Chinese Revolution, China used the odious debt doctrine to justify default on bonds issued in connection with the building of the Huguang Railway during the previous regime in litigation arising before US courts in 1952.

The odious debt doctrine can be used to justify default on payment of some debts. Strategically, it would be best to use the doctrine to renegotiate or reschedule the debt obligation. The doctrine will enable an argument that some debts which carried little public benefit should be rescheduled in a manner favourable to Sri Lanka. The countries that are using this doctrine will increase. The doctrine has been discussed in connection with Greece, Ecuador and Venezuela. The doctrine featured in the rescheduling of Argentine debts during its economic crisis in 2000.

In 2003, the Bush administration favoured the cancellation of Iraqi debts partly on the ground that the debt obligations were created during a dictatorial regime. Many Iraqi debts were cancelled. Debts incurred by colonial governments were renounced by the newly independent states, Algeria and Indonesia providing examples. In the immediate post-colonial period, developing states made the argument that they do not succeed to debt obligations incurred during colonial rule. The affinity with such past situations with the current debts of states exist when an authoritarian leader clothed in the vestiges of democracy commits his country to unwise loans that do not further the public interest but advance his personal interests.

The odious debt doctrine is not supported by extensive case law because it is an argument used largely for the restructuring of debts. It provides a useful tool to base an argument for cancellation or renegotiation of unsavoury debts. In the Sri Lankan case, the debts owed to China do attract the application of the doctrine. The Chinese debts form only 10% of our debts. The extent to which loans by private institutions can be subject to the doctrine is uncertain due to lack of information. Given the context in which Sri Lanka finds herself, exploration of the use of the application of this doctrine to the Sri Lankan debts is necessary.

The potential finding of the Sri Lankan debts as odious debts also requires reform of the rules that regulate the raising of loans by the state. In a country ruled by successive authoritarians, maintaining power through ethno-religious chauvinism, the practice of securing corrupt loans will be rife. There should be constitutional and other regulatory mechanisms controlling future governments raising loans from foreign banks. Besides complete transparency, there should be demonstration of clear public benefit objectives that are secured by the loan and the spending of the money.

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Features

Dilemmas of ‘hurting economies’ – the case of Sri Lanka

Published

5 hours ago

2026/05/7

Sahan Weerasooriya

Dr. Ganeshan Wignaraja (right) and Ambassador (Retd) Ravinatha Aryasinha.

Maldives President Dr. Mohamed Muizzu was in Sri Lanka recently on what was apparently a goodwill visit and this event, no doubt, bodes very well for Maldives-Sri Lanka relations. Besides, the visit would go some distance in strengthening Sri Lanka’s claims to Non-Alignment.

However, the commentator on regional politics could be accused of simplistic thinking if he/she glosses over or ignores the regional politics nuances or undertones of the Maldivian President’s visit. In Sri Lanka we currently have a government which is eager to solidify its bridges, so to speak, with China and which, given the chance, would be courting increasingly close relations with Russia. In other words, the NPP government is likely to see itself as a ‘natural ally’ of the East and would prefer to distance itself to the extent possible from the West, if that is a realistic proposition.

Given the foregoing backdrop, it would be in some of the NPP regime’s best interests to be on cordial terms with the Maldives which is a close ally of China in the South Asian region. However, the NPP government, given the utter financial helplessness of Sri Lanka, cannot afford to distance itself politically and diplomatically from India and the West. Sheer economic necessity compels Sri Lanka to adopt this foreign policy stance. In other words, the latter has no choice but to be ‘Non-Aligned.’

This columnist was led to the above observations on listening to a lucid and comprehensive presentation titled, ‘A Global Economy in the Shadow of the Iran War and implications for Sri Lanka’s debt recovery’, by Dr. Ganeshan Wignaraja, Visiting Senior Fellow, ODI Global London, at the Regional Centre for Strategic Studies (RCSS), Colombo on May 4th. The forum, RCSS Strategic Dialogue – 4, was moderated and presided over by RCSS Executive Director Ambassador (retd) Ravinatha Aryasinha.

The forum brought together a wide cross section of society, including diplomatic personnel, academicians, public and private sector personalities and the media. After the presentation a very lively and informative Q&A followed.

Ambassador Aryasinha at the outset set an appropriate backdrop to the presentation and discussion by stressing ‘the increasing interconnectedness of geopolitical and economic developments, noting how disruptions in the Middle East could have significant ramifications for global markets, trade flows, energy prices and broader economic stability, including Sri Lanka.’

Indeed, there are occurring currently very disruptive economic and material consequences for the world from ‘the Iran War’, and with US-Iran hostilities spiraling in West Asia it may not be wrong to surmise that the worst could be yet to come, unless a peace process materializes in earnest.

Meanwhile, ‘hurting countries’ such as Sri Lanka would need to summon their best economic management capabilities to remain materially and economically afloat. ‘Economic transformation’ is what is urgently needed and not mere management and some of the insights thrown up by Dr. Ganeshan Wignaraja should have the local polity thinking.

There was the following observation, for instance: ‘Sri Lanka has achieved remarkable cyclical stabilization but faces critical challenges in transitioning to transformative growth, with 2027-2028 debt repayments looming and only $5.4 billion usable reserves.’

Needless to say, the path ahead to ‘transformative growth’ for Sri Lanka is strewn with multiple challenges and meeting them effectively is of the first importance. Sri Lanka must soldier on towards even a semblance of development in the short and medium terms and such initiatives cannot be separated from its foreign policy choices since the country’s economic partners and their growth prowess have a close bearing on the country’s material fortunes.

As mentioned, Sri Lanka will be compelled to be ‘a friend of all countries and an enemy of none’ going forward but it cannot afford to be seen as cultivating China as a close growth partner at the expense of India and other major economies of the region.

This is primarily because while India is remaining a major economic power, the current West Asian crisis notwithstanding, China’s economy is being seen as ‘slowing’. Dr. Wignaraja singled out the following in the main as the factors causing this slow-down: a bursting property bubble, increasing state regulation, and weakening investor confidence. Besides, the speaker sees production cycles moving away from China and India replacing China and Hong Kong as ‘manufacturing hubs’.

Accordingly, the NPP regime in Sri Lanka would need to craft its regional policy in particular with the utmost far-sightedness. It will need to have close economic links with all the growth centres that matter.

On the question of authentic economic transformation, the following observations of Dr. Wignaraja on Sri Lanka’s economy are of the first importance as well: ‘Foreign reserves are now at $ 5.4 billion, the cost of living is high, an estimated 20 per cent of the population lives below the poverty line of $ 3.65 per day, the recent cyber security breach at the Treasury would affect some 10 payments.’ These factors were termed ‘critical vulnerabilities’.

It is difficult to conceive of an economic transformation worthy of the phrase minus a steady economic empowerment of the populace. The above data point to the considerable magnitude of the local poverty problem. Right now, the disruptive effects of the West Asian crisis render swift poverty alleviation a most difficult proposition.

One possible way out of the present economic debacle is the forging of a national consensus by the present government on all outstanding problems that have been bedeviling the country’s advancement. That is, there needs to be a meeting of minds across current political divides. Considering the present inflammatory political polarities in Sri Lanka this would prove an insurmountable challenge.

Unfortunately, conscience-filled and civic minded sections in Sri Lanka have chosen to be laid back rather than seize the initiative, come centre stage and impress on politicians the need for enlightened governance and progressive change. There needs to be a historic coming together of the right thinking to ensure that the best interests of the people and of the people only are served by governments. In the absence of such a process, might would be projected as right and brute force would come to increasingly rule politics and society.

Features

Australia funds project to restore climate-resilient vegetable livelihoods in cyclone-affected highlands

Published

5 hours ago

2026/05/7

Sahan Weerasooriya

(L-R) D. P. Wickramasinghe, Secretary of Agriculture; Matthew Duckworth, Australian High Commissioner to Sri Lanka, K. D. Lal Kantha, Minister of Agriculture, Livestock, Lands and Irrigation, and Vimlendra Sharan, FAO Representative for Sri Lanka and the Maldives at the signing ceremony.

The Ministry of Agriculture, Livestock, Lands and Irrigation, the Government of Australia, and the Food and Agriculture Organization of the United Nations (FAO) have launched of a AUD 2 million (USD 1.4 million) recovery initiative to restore and transform vegetable production systems in the cyclone-affected districts of Nuwara Eliya and Badulla.

The FAO said yesterday (5) that the agreement was formalized through the signing of the grant agreement by Matthew Duckworth, Australian High Commissioner to Sri Lanka, and Vimlendra Sharan, FAO Representative for Sri Lanka and the Maldives, alongside the signing of the project document by D. P. Wickramasinghe, Secretary of Agriculture.

Cyclone Ditwah, which struck Sri Lanka in November 2025, caused widespread devastation across the country, severely disrupting agricultural production systems and livelihoods. The highland districts of Nuwara Eliya and Badulla, key suppliers of vegetables such as beans, carrots, leeks, cabbage, tomato and potato, were among the hardest hit, with thousands of smallholder farmers losing crops, seed stocks, and productive assets.

This 12-month initiative aims torestore and strengthen climate-resilient vegetable production systems, with a strong focus on empowering women farmers and supporting persons with disabilities. The project will directly benefit more than 2,400 smallholder farmers, through improved seed and seedling production systems, small machinery, training, and market linkages while indirectly supporting thousands more.

“This initiative is an important step not only in restoring what was lost, but in building a more resilient and self-reliant agricultural sector,” said Minister Lal Kantha. “By strengthening local seed systems and supporting smallholder farmers, particularly women and vulnerable groups, we are investing in the long-term sustainability of Sri Lanka’s food systems.”

“Australia stands alongside Sri Lanka in its ongoing recovery from Cyclone Ditwah,” said High Commissioner Duckworth. “Australia is a steadfast partner in the agriculture sector with its importance for food security, rural development and climate resilience. By focusing on climate smart practices, farmer-led solutions and inclusive economic opportunities, this project will deliver meaningful and lasting benefits to affected communities.

The project will prioritize the restoration of farmer-led seed systems for beans and potatoes, support the re-establishment of both open-field and protected cultivation systems and women led seedling supply nurseries while empowering all farmers with Climate-Smart Good Agricultural Practices (CSGAP) with small scale machinery and input support.

A key feature of the initiative is the establishment of six accessible and inclusive nurseries in Nuwara Eliya and Badulla. These nurseries will serve as sustainable agri-based enterprises, producing high-quality vegetable seedlings while creating new income opportunities and strengthening local input supply chains.

By combining recovery support with long-term resilience measures, the project will help stabilize vegetable production, improve household food security and nutrition, and reduce reliance on imported seeds.

Features

War on Iran may hasten unraveling of New World Order

Published

5 hours ago

2026/05/7

Sahan Weerasooriya

It took several decades for the US to realise it was losing the war in Vietnam. It took a bit shorter time in Afghanistan. And what is happening in the countries the US and Israel intervened and broke up? The US has been asked to leave Iraq. Syria is talking to Russia about establishing military bases, President al-Sharaa met with Vladimir Putin in Moscow to discuss the project, which is vital for Russian power projection in the Middle East. Libya has been divided into two competing administrative units with the Eastern section actively engaged with Russia in defence matters. The Sudanese government has finalised a 25-year deal to allow a Russian naval facility in the Red Sea in exchange for weapons, including anti-aircraft systems. On the Eastern side of the Red Sea, Yemen remains divided, with the main power center, the Houthis maintaining a staunchly anti-US, anti-Israel stance, while the internationally recognised government remains in exile.

When the Iranian Foreign Minister recently undertook a tour of Pakistan, Oman and Russia, the US wanted to meet him and got ready to send its negotiators Vice President J. D. Vance and his team to Pakistan, but Iranian FM snubbed them and left Pakistan, saying Iran did not want to talk to the US while a blockade of their ports were in place. The Iranian FM met President Putin, who congratulated Iran for courageously defending their country and then phoned US President Trump and told him further attacks on Iran would not be acceptable. During this conversation on April 27, 2026, Putin reportedly warned Trump that further U.S. or Israeli attacks on Iran would have dangerous consequences, according to Al Jazeera). Such a sequence of events would not have been possible in the unipolar world we had in the past.

Furthermore, the damage that Iran has inflicted on the US and Israel in this war would have been unimaginable in the late 20th Century and early 21st Century. Sixteen US military bases spread across Saudi Arabia, Qatar, UAE, Bahrain, Kuwait, Iraq, Jordan and Oman have been either destroyed or severely damaged. Advanced surveillance aircraft and radar systems worth more than $ 2.8 bn were destroyed. This had a far-reaching effect on the war as the US could not use these bases in the war against Iran and also in the defence of its allies in the Gulf.

The attacks on Israel have been equally damaging. In Central Israel and Tel Aviv area multiple attacks targeted military and intelligence assets, resulting in massive damage. Iranian missiles hit the Haifa oil refinery, causing a shutdown, and hit residential buildings, leading to injuries and structural damage. Residential and commercial areas were damaged in Bat Yam and Petah Tikva with significant casualties and destruction. Attacks in Dimona and Arad targeted the Negev Nuclear Research Center, with casualties reported in both towns. The Soroka Medical Center in Beersheba was hit in a strike. The strategic port and naval base in Eilat were targeted. In Rishon LeZion suburban residential areas suffered extensive damage.

Usually, Israel makes short work of its many enemies in the region, for example it took just six days to defeat the combined military of Egypt, Jordan and Syria in 1967 and grab their land as well. Hamas, Fatah and Palestinians would suffer ignominious defeats if they dare challenge Israel. However, the recent war against Hamas, following a daring wide scale invasion into Israel by Hamas in October 2023, went on for more than two years with no conclusive victory for Israel.

These significant massive military setbacks suffered by the combined forces of the US and Israel have been made possible by the unprecedented advancement in military technology achieved mainly by China and to a degree by Russia as well. Iran has been able to develop ballistic missile systems that could penetrate the “iron dome” that Israel boasted, with technological assistance from China and North Korea. Iran’s drones are very cheap yet very effective, requiring interceptors worth millions of dollars to counter them, thus making it much more costly for the US to fight this war than it is for Iran.

Further, Hezbollah in Lebanon, Houthies in Yemen and Hamas in Palestine are well equipped with advanced missiles and drones. Hezbollah has been able to destroy about hundred Israel tanks and stop their advance. According to Larry Johnson, former CIA intelligence analyst, Israel soldiers are much war weary and mentally affected and are being withdrawn. Netanyahu’s 40 year dream of a “Greater Israel” is telling on the poor soldiers.

If a person like Barack Obama had been the US President instead of the hyper egoistic, blustering, intellectually barren Trump, things may have been different. An attempt would have been made to reconcile with the fact that the world is changing, instead of trying to stop it and make “America Great Again”. Perhaps, it could be said that Trump is facilitating the emergence of the new world order by enabling the US citizens to see the reality, the futility of war and the fact that Israel is a liability because the US is fighting its war. Further, the war has enabled Iran to assert its place in the region and negotiate from a position of strength.

Perhaps, Israeli people may realise that the Palestine problem cannot be solved by militarily occupying their land, and that in a changing world a “Greater Israel” is a “pie in the sky”. They may have to agree to a two-state solution. US support may not always be forthcoming, certainly not at the level that Trump could extend, as this war is very unpopular and expensive. The other very significant fact is that Israeli settlers in the occupied lands feel insecure and one in three wants to leave and the numbers may grow when Palestinians and their sympathisers grow in strength in the new world order.

Moreover, the war on Iran has afforded China the opportunity to demonstrate with authority the fact that it stands for universal peace and does not tolerate illegal wars. Its message to the US conveyed its world view and its desire for peace in no uncertain terms. Trump cannot afford to disregard the Chinese position on the war on the eve of his visit to that country which may decide on future trade between the two countries as the US depends on China for several essential materials like rare earth minerals. Furthermore, China has shown that peace could be achieved by developing the economies of the underdeveloped countries irrespective of their alliances. It helps Iran as well as Saudi Arabia and try to build bridges between these foes. It welcomes Trump in the coming weeks and hopes to strengthen ties between the two countries despite the weaknesses of the latter.

Another important factor is the gradual decline of the critical value of the petro-dollar. Following the end of the gold standard in 1971, the US struck deals with Saudi Arabia and other OPEC nations (around 1974) to price oil exclusively in USD in exchange for military protection and arms sales. Dollars earned by selling oil came to be known as petro-dollar. Oil producers, holding large dollar surpluses, reinvest these funds in the US Treasury securities, real estate, and financial assets ensuring the recycling of petro-dollars. The system ensures a consistent global demand for US dollars, which helps fund the US budget deficit and maintains the currency’s dominance.

However, the petro-dollar system is on the decline and there are two main reasons for this, firstly the gradual rise of the new world order with organisations like BRICS, making a concerted effort to extricate from the dollar dominance by developing alternate currencies and methods to bypass the dollar. Secondly, the need felt by most countries to develop alternative energy sources to replace enormously harmful fossil fuel would eventually result in a decline in the demand for it and consequently the effectiveness of the petro-dollar. China is leading the world in both these endeavours; depolarisation process and renewable energy production. The war on Iran seems to have hastened the process of depolarisation as Iran insists that it will sell its oil for yuan only.

These revolutionary changes in the aftermath of the Iran war have their undeniable implications for the Global South, where more than 60% of the poor live.

by N. A. de S. Amaratunga