The India-Middle East-Europe Economic Corridor: A game-changing initiative

Achieving a consensus on the Leaders’ Declaration at the recent G20 Summit in New Delhi was undoubtedly a triumph for ‘’Team India’’ under the bold and visionary leadership of Prime Minister Narendra Modi.

An equally successful and far-reaching accomplishment was the new initiative to develop a rail and shipping corridor connecting India to Europe via the Middle East/West Asia. Leaders from the United States, India, Saudi Arabia, the United Arab Emirates, France, Germany, Italy, and the European Union signed a Memorandum of Understanding (MoU) agreeing to establish a new India-Middle East-Europe Economic Corridor (IMEC).

The IMEC Initiative

What makes this outcome particularly salient, especially from a geopolitical perspective is that some of the most significant Middle Eastern countries including Saudi Arabia, Israel, the UAE, and Jordan are part of the project. While making this announcement at the G-20 Leaders’ meeting under the aegis of the G7-led Partnership for Global Infrastructure and Investment (PGII), the participating leaders declared that the IMEC will involve rail connectivity, shipping lines, high-speed data cables, and energy pipelines. These will add to the already existing networks and will provide alternatives to promote movement of trade and services “to transit to, from, and between India, the UAE, Saudi Arabia, Jordan, Israel, and Europe.”

Ever since China launched its Belt and Road Initiative (BRI) in September, 2013 from the Nazarbayev University in Astana, Kazakhstan, and in October, 2013 from the Indonesian Parliament in Jakarta, the United States and its partners have been struggling to find an adequate response to this challenge. The BRI in its operations over the last ten years has been seen to offer financing options for creating infrastructure principally in developing countries that ‘’lack transparency, poor governance, and create unsustainable debt burdens, often leading to projects that exploit, rather than empower, workers; exacerbate challenges faced by vulnerable populations, such as forced displacement; degrade natural resources and the environment; threaten economic stability’’ etc. The PGII is an infrastructure initiative which was launched as a counter to China’s BRI at the G-7 Summit in August 2022. IMEC, which has been conceived under the rubric of the PGII, once completed and operationalized successfully could emerge as a viable alternative model to the BRI as it is a transparent initiative, doesn’t result in an unsustainable debt burden, is economically viable, is not coercive, is environmentally sustainable and brings in job opportunities and new technologies for the host countries.

Among the ports that could be connected under the IMEC are Mundra (Gujarat), Kandla (Gujarat), and Jawaharlal Nehru Port Trust (Navi Mumbai) on the west coast of India. In the Middle East, at least five ports have been shortlisted to be connected to the Indian ports which include Fujairah, Jebel Ali, and Abu Dhabi in the UAE as well as Dammam and Ras Al Khair ports in Saudi Arabia. “Multiple routes are being considered to prospectively reduce the freight load on one route.” It is to be noted that apart from government-owned ports, both Mundra port in India and Haifa port in Israel are privately controlled by the Adani Group. The onward rail route connectivity from five ports in UAE and Saudi Arabia stretching up to Haifa port in Israel are likely to be a mix of already existing Brownfield projects and fresh Greenfield projects to connect missing links.

The project can be seen as the re-creation of the historical Spice Route that existed from India to the Arab World and from there onwards to Vienna in Europe several thousand years ago. It worked efficiently for several millennia till it was disrupted by the discovery of the maritime route from Europe around the Cape of Good Hope of Africa in the late 15th century. The launch of the IMEC project will re-create the historical routes and will, in addition to the economic advantages, also have geo-political benefits by bringing India, the Middle East and Europe further closer together.

The strong support of the US to IMEC is an unambiguous message that the US will continue to be actively engaged with the Middle East region and will not leave the area which could give rise to a power vacuum.

The IMEC project will be particularly beneficial for India as it will enhance its political, strategic, economic and commercial engagement with the Middle East as well as with Europe. UAE is India’s 3rd largest trading partner. Saudi Arabia is the 4th. In addition, India has about 8-9 million strong diaspora in the Gulf region. The region is also the largest energy supplier for India and the source of huge remittances which go a long way to help the country manage its current account deficit. The region has emerged as one of the strongest economic, strategic, security and trade partners of India in recent years. India is engaged in concluding an FTA with the Gulf Cooperation Council after having signed one recently with the UAE and also entered into an I2U2 commercial and economic arrangement with the US, Israel and the UAE. Similarly, Europe is a significant partner for India in the fields of trade, investment and technology. India and Europe enjoy a significant potential to enhance their partnership both bilaterally with the major economies like Germany, France, Italy, UK and others, as well as through the FTAs being negotiated with the EU and the UK.

It has been suggested that the corridor could be extended to Africa, aligning with the US and EU’s plan to develop a Trans-African corridor. This would be in line with India’s intent to strengthen its engagement with Africa and contribute to the latter’s infrastructure and economic development.

The geo-political significance of IMEC is also considerable. China has been expanding its footprint in the Middle East and Europe over the last few years. This is visible in the $400 billion deal signed by it with Iran in recent years, the rapprochement engineered by it between Iran and Saudi Arabia, as also the rapid expansion of BRI projects in the Middle East and Europe. Through the IMEC the participating countries have unequivocally declared that there is another game in the town in addition to the BRI which is more beneficial and advantageous to the host countries. The presence of India, Middle Eastern and European countries in this project jointly will provide a more than adequate balance to the rising profile of China in the Middle East and Europe.

Some challenges and doubts have been voiced by certain parties whose interests are likely to suffer as a result of the operationalization of the IMEC. The Indian Ship Owners Association has stated that the ‘’all-sea route is convenient as we are assured that our cargo will land from point to point. It moves seamlessly without any obstructions. However, in the alternatively proposed IMEC, the number of times the cargo will get offloaded as it changes hands from ship to rail will increase the handling costs which include terminal-handling charges, container yard charges and so on. That seems like a bit of a challenge.’’

In addition, diplomatic sources have argued that Egypt, which could lose revenue if the Suez canal is bypassed, could raise objections to the plan. Although Egypt was one of the special invitees at the G-20, and Egyptian President Abdel Fateh al Sisi was the chief guest at this year’s Republic day parade in India, it was not among the countries that launched the Memorandum of Understanding (MoU) on September 9.

These and some other concerns that might surface as the IMEC starts getting implemented and operationalised will have to be appropriately addressed.

Conclusion

US President Joe Biden called IMEC ‘’a real big deal.’’ European Commission President, Ursula von der Leyen said that India-Middle East-Europe corridor is “nothing but historic’’ and provides ‘’state-of-the-art connections for the world of tomorrow: faster, shorter and cleaner.” She added that the link will make trade between India and Europe 40 per cent faster and would be “a green and digital bridge across continents and civilizations.” Israeli PM Benjamin Netanyahu has termed this project as the “largest cooperation project in our history” that will “change the face of the Middle East, Israel, and will affect the entire world.”

Three significant reasons have been advanced for developing the corridor. First, it would increase prosperity among the countries involved through an increased flow of energy and digital communications. Second, the project would help deal with the lack of infrastructure needed for growth in lower- and middle-income nations. And third, it could help “turn the temperature down” on “turbulence and insecurity” coming out of the Middle East. The project will aim to enhance transportation efficiency, reduce costs, increase economic unity, generate employment, and lower Greenhouse Gas (GHG) emissions. It is expected to transform the integration of Asia, Europe, and the Middle East by facilitating trade and connectivity.

IMEC enjoys a huge potential in economic, commercial and geo-political benefits for all participants who have put their signatures to the MOU. The challenge is to actualize it from the drawing board into action on the ground in a short time frame. The next few months and years will be critical to ensure that the MOU is put into action without any inordinate delays.

Also Read: I2U2 set for revival as India drives landmark initiatives from Middle East to Europe