The United States will provide a loan worth more than $550 million for an Indian-led deep-sea container terminal in Sri Lanka, officials said Wednesday, with the project seen as countering China's rising influence in the Indian Ocean.
Sri Lanka sits astride the world's busiest shipping route, which links the Middle East and East Asia, giving its maritime assets strategic importance.
The new Colombo West International Terminal is being built by a consortium led by India's Adani Group – which earlier this year denied accusations of "brazen" corporate fraud by a U.S. short-seller.
The Adani facility has an estimated cost of $700 million and is located immediately next to a similar Chinese-run jetty at the capital's sprawling port.
The U.S. government-run International Development Finance Corporation said it was providing $553 million in funding for the Adani-led project.
"Sri Lanka is one of the world's key transit hubs, with half of all container ships transiting through its waters," DFC chief Scott Nathan said in Colombo.
Sri Lanka went bankrupt in a financial crisis last year, but the loan to the private development would not add to its sovereign debt, Nathan added, "while at the same time strengthening the position of our allies across the region."
The new container jetty will be 1.4 kilometers (0.87 miles) long, 20 meters (65.62 feet) deep and have an annual capacity of 3.2 million containers.
China's maritime activities around Sri Lanka have raised concerns for regional power India in recent years.
Two of Beijing's submarines used the Chinese-run jetty next to the Adani development in 2014, despite strong opposition from New Delhi.
And in December 2017, unable to repay a huge Chinese loan, Sri Lanka allowed China Merchants Port Holdings to take over the southern Hambantota port.
The deal, which gave the Chinese company a 99-year lease, raised fears about Beijing's use of "debt traps" in exerting its influence abroad.
India and the U.S. have also expressed concerns that a Chinese foothold at Hambantota could give Beijing a military advantage in the Indian Ocean.
Last year, the port hosted a Chinese research ship that India accuses of spying.
Sri Lanka, however, has insisted that it will not allow its ports for any military use against any other country.