This is a study of how large powers compete for influence in small states. The focus of my empirical analysis is an in-depth case study of U.S. foreign aid to Sri Lanka, investigating the multiple objectives and mutual advantages of the aid relationship between donor and recipient countries. The Sri Lanka case is a compelling one, given this small state’s proximity to India and China and those countries’ attempts to develop significant investments in Sri Lanka. Both India and China have become important sources of foreign investment and aid in Sri Lanka in recent years, in spite of its small size and population. In fact, given its strategic location and abundant natural resources, Sri Lanka has the potential to engage large regional powers and the U.S. in competitive behavior. Although policy-makers may question the usefulness of U.S. aid flows to Sri Lanka, current trends suggest that U.S. foreign aid is a worthwhile investment in a burgeoning democratic state with abundant natural resources and a strategic location. This research is based on fieldwork, interviews with policy-makers, and documentary evidence.
