Iranian president launches Sri Lanka refinery work

By Ranga Sirilal

COLOMBO, April 29 (Reuters) - Iranian President Mahmoud Ahmadinejad launched a project to boost the capacity of Sri Lanka's main oil refinery on Tuesday, part of a $1.5 billion loan to the government as Iran extends its energy ties in South Asia.

Ahmadinejad's visit came as President Mahinda Rajapaksa, increasingly isolated over criticism from Western countries about its human rights record in a 25-year-old civil war with Tamil Tiger separatists, seeks closer ties with Asian countries.

Ahmadinejad, who visited Pakistan in Monday to seal a $7.6 billion pipeline deal opposed by the United States, will travel later on Tuesday to India, which is also interested in the pipeline to feed its booming economy

"We are seeking justice and fair play in the world and Sri Lanka and Iran have agreed to cooperate in all spheres for the mutual benefit of each other," Ahmadinejad told reporters late on Monday on his arrival in Sri Lanka.

Iran had pledged a $1.5 billion loan to fund a raft of infrastructure projects in Sri Lanka, including boosting oil refinery capacity and a 100 megawatt hydropower project.

Hours before Ahmadinejad arrived in Colombo, the national power grid crashed for the second time in a month underlining the precarious state of Sri Lanka's infrastructure.

Infrastructure work has been a low priority in the island nation because of the civil war between the state and Tamil Tiger rebels that has killed more than 70,000 people.

In Islamabad on Monday, Iran and Pakistan said they had settled all issues relating to plans for the billion-dollar gas pipeline.