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How viable is the India-Middle East-Europe Economic Corridor given regional tensions?

December 19, 2023 at 2:44 pm

Indian Prime Minister Narendra Modi (R) meets with European Commission President Ursula von der Leyen (L) in New Delhi, India on April 25, 2022 [Indian Press Information Bureau – Anadolu Agency]

The post-Covid world is undergoing a politico-economic transformation. Instead of becoming part of any bloc, states are becoming more inclined to conceive small alliances in their national interests, and ensure multilateralism. In this regard, the 18th G20 Summit concluded in September with a joint declaration thirty-seven pages long. Hosted by India, the summit allowed New Delhi to showcase its soft power and diplomatic proficiency by securing the consensus of participants over what are deemed to be delicate global issues, such as the Ukraine-Russia war. However, one of the most significant announcements came on the sidelines of the summit: the launch of a new economic corridor encompassing territory in South Asia, the Middle East and Europe.

The India-Middle East-Europe Economic Corridor (IMEC) is a rail and shipping corridor that aims to boost regional development and economic interconnectivity between India, the USA, the UAE, Saudi Arabia, Jordan, Israel and the European Union. The project consists of two corridors: the eastern corridor will connect India to the Arabian Gulf, and the northern corridor will connect the Gulf to Europe. The IMEC provides India with a chance to enhance its economic connectivity with the rest of the world, as the project provides an alternative to its International North-South Transport Corridor (INSTC) that is struggling due to western sanctions on two of its main members, Russia and Iran. As a near alternative, the European Commission President, Ursula Von der Leyen said that the IMEC offers a direct connection between India, the Gulf and Europe, and will enable 40 per cent faster trade between member states.

The IMEC appears largely as a challenge to the Chinese Belt and Road Initiative (BRI), Chinese President Xi Jinping’s flagship project initiated in 2013.

Even though it seems that the IMEC would boost the Indian economy and enhance its development capacity by challenging the BRI, the move is nothing more than political optics by India. By launching the multi-dimensional project, India wanted ostensibly to send a message to the G20 — mainly the US — about having a potential economic partner that could provide an alternative to Xi’s BRI. For the sake of its Presidency of the Summit, the move may have assisted India to showcase its soft image, but the similar earlier initiatives by Prime Minister Narendra Modi suggest otherwise. Modi’s government initiated two international alliances — the International Solar Alliance (ISA) and the Coalition for Disaster Resilient Infrastructure (CDRI) — and both have failed to achieve their objectives so far. India’s IMEC could meet a similar fate as its preliminary alignment plans lack the project’s completion time-frame and do not explain how it would be more cost effective than the BRI.

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Moreover, India has not laid out any plans to deal with the instability in the Middle East, where the option of investing in infrastructure development carries great risk due to the physical terrain and violence by various armed groups. Hence, there are technical limitations that the IMEC may face, not least in the Middle East due to its vast desert regions. The construction of railway lines and subsequent transportation of goods would be a difficult task requiring everything from the standardisation of the railway track gauges to the engine configurations. What’s more, one of the main link ports of the IMEC, Haifa, is in Israel, a country which is unstable at the moment due to the Palestinian freedom struggle.

The BRI, meanwhile, is already a well-established trillion-dollar economic project that promises sustainable results for its partners. The fact that it is the brainchild of a single country — China — and encompasses different continents means that there is no direct comparison with the IMEC. Even though no economic forecast has been announced for the IMEC, some media analysts estimate it at around $20 billion, which is far less than China’s investment in the BRI, which is nearly $1 trillion.

Furthermore, the West and India cannot keep China away from IMEC projects. This is mainly due to the multibillion investments of Chinese companies in IMEC members’ information technology, energy distribution and infrastructure development sectors. One of the IMEC’s possible entry destinations in Europe, Piraeus port in Greece, is run by the state-owned China Ocean Shipping company. Similarly, Chinese companies — PowerChina, for example — have undertaken several Saudi rail projects, such as Etihad Rail’s Phase one and two. The Kingdom’s increasing collaboration with China stems from the former’s ambitious Vision 2030 that aims to diversify the Saudi economy into a global financial hub.

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Israel’s current war against the Palestinians in the Gaza Strip is a significant development which cannot go unnoticed in the overall planning segment of the IMEC; it poses a serious threat to the project’s success, which is evident from the 4.7 per cent fall in the Haifa port share price within the first three days of fighting. Haifa is facing an increasing backlog of ships and cargo due to the volatile situation. If the conflict expands beyond Israel — into Egypt, Jordan, Syria or Iran, for example — there is a potential threat of disruption in trade and transit activities through the Mediterranean Sea and Persian Gulf which would impede the smooth working of the IMEC. The negative effects of the conflict can be seen in the suspension of Saudi-Israel normalisation talks by Riyadh soon after the Israeli attacks on Palestinian civilians in Gaza began. Both countries are members of the IMEC, but even if the project carries the banner of economic integration, geopolitics will always have to be considered.

In such a scenario, Iran’s rivalry with Israel and the US cannot be ignored. Any instability which does not sit well with Iran’s ideological and regional aspirations would have an effect on the whole region. We have already seen Iran-backed Houthis in Yemen declaring war on Israel and attacking various Israel-linked cargo ships in the Red Sea. If, in future, any such situation arises in the Persian Gulf, a possible sea route for the IMEC’s Eastern corridor, it would check the Middle East’s connectivity with India.

The initial outlines of the project stipulated that the member countries were supposed to meet two months after the signing of the Memorandum of Understanding to set out an action plan for the IMEC. However, the Hamas attack on 7 October in occupied Palestine and the subsequent rise of anti-Israel sentiments across the Muslim world have more or less halted any progress on the project. When Jordan sponsored a UN General Assembly resolution on 27 October for a humanitarian truce in Gaza, the government in Amman was walking a tightrope with a balanced approach towards both Hamas and Israel. The Hashemite Kingdom’s citizens are generally supportive of the Palestinian struggle for freedom from Israel’s decades-long military occupation. In the circumstances, therefore, any pro-Israel move by Amman in the shape of economic connectivity could have a destabilising effect in Jordan.

At a time when regional stability can deteriorate exponentially at any moment, therefore, the viability of the IMEC remains unclear.

READ: Israel: revenue from Eilat port drops by 80% due to Houthi Red Sea attacks

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.