You might think Sri Lanka would be small change for Asia’s two powerhouses.

But maneuvering by China and India underscores the strategic importance both attach to the island nation.

Called Ceylon in English until 1972, Sri Lanka occupies a strategic location in the Indian Ocean that since the 17th century has attracted Portuguese, Dutch, French, British and finally Indian traders.

Now China is investing in a big way and flexing its military muscles as the Asian giant extends its influence beyond its borders.

Sri Lanka, located just off India’s southeastern tip, sits on major sea lanes and has one of the world’s finest harbors in its eastern seaport of Trincomalee.

It owes close relations with India to more than geography. Sri Lanka’s majority community, the Sinhalese, came from northern India while minority Tamils came mainly from Tamil Nadu state in southern India.

India’s key role

India was home to Gautama Buddha, spiritual leader of millions of Buddhists in Sri Lanka.

India played a crucial role in Sri Lanka’s 26-year civil war, which ended six years ago and pitted Tamil separatist rebels against Sri Lankan government forces. India was keen to establish itself as a regional power and also feared a separatist revolt by its own Tamils.

In the early years of the insurgency that started in 1983, India allowed Tamil rebels from Sri Lanka to operate training camps in south India, and India sent a peacekeeping force to its maritime neighbor.

In 1987, then Indian Prime Minister Rajiv Gandhi tried to broker an end to fighting. When the rebels pulled out of the pact, Indian troops turned their guns on them.

In 1991, the rebels exacted vengeance: A female cadre set off a bomb strapped to her waist as she greeted Gandhi at a campaign rally in Tamil Nadu, killing him instantly.

China stepped into the breach, offering the Sri Lankan government military support in its fight against the rebels.

Jostling reaches new heights

When the insurgency ended in 2009, then Sri Lankan President Mahinda Rajapaksa invited the Chinese to develop massive infrastructure facilities including a second international airport, an expressway connecting the capital city to the country’s main airport and a new seaport.

These would not be China’s first deals in Sri Lanka. In 1952, to the annoyance of the West, Sri Lanka signed a rubber-for-rice barter deal with China that lasted for three decades.

More recently, China backed Sri Lanka in the face of U.S.-sponsored resolutions against Colombo at the U.N. Human Rights Council — resolutions that were supported by India.

Now, jostling between China and India has reached new heights.

Delicate balancing act

Last November, two Chinese submarines and a warship docked at Colombo harbor, prompting a protest by India, which said the warships had violated a 1987 peace accord between Delhi and its southeastern maritime neighbor.

More recently, Sri Lanka’s new president, Maithripala Sirisena, who ousted Rajapaksa in elections in January, suspended a mega port city development project by a Chinese government-backed company, citing allegations that it lacked proper approvals.

Environmentalists and civil society groups oppose the project, saying that reclaiming 575 acres of water front would harm the environment and sea life.

Most analysts expect the project to win eventual approval. But its suspension underscores the high stakes at play as Sri Lanka balances the interests of the two Asian powers.

This year, Chinese tourists are set to become the second largest contingent of visitors after Indians. Like it or not, Sri Lanka depends on both India and China.

The government risks losing votes ahead of parliamentary elections in June if it pushes through the Chinese-backed project. But that could be the price to pay as Sri Lanka walks a diplomatic tightrope between India and China.

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Feizal Samath is a Sri Lankan who covered the war between Tamil Tiger guerrillas and government troops, and the leftist insurgency attempting to overthrow the government, for Reuters. A journalist for nearly four decades, he more recently has covered economic development in Sri Lanka for a newspaper in Colombo. A social activist and guitarist, Samath founded a concert series that has raised millions of rupees for children’s charities.

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WorldAsiaBig stakes in small Sri Lanka for China and India