In recent G20 Summit, a historic agreement was reached in India, where world leaders came together in unity. Among those present were the Prime Minister of India, the President of the United States, the Chancellor of Germany, the Crown Prince of Saudi Arabia, the President of the UAE, the Prime Minister of Italy, and the President of the European Union. In a unanimous decision, they set in motion the establishment of the India-Middle East-Europe Economic Corridor (IMEC).
This ambitious project envisions a vast rail and shipping route that will span across continents. It will be equipped with cutting-edge fiber optics, clean hydrogen pipelines, and economic zones that will stretch from India, through the UAE, Saudi Arabia, Jordan, and Israel, all the way to Piraeus Port in Greece.
Over the next two months, a dedicated working group will meticulously outline timetables, financing plans, and project details. If this grandiose initiative comes to fruition, it has the potential to usher in a new era of economic integration between the Middle East, South Asia, and Europe. Notably, some in Israel see this as an opportunity to further diplomatic normalization with Saudi Arabia, aligning with broader U.S. strategic objectives in the Middle East.
According to a statement from the White House, the IMEC initiative will consist of two separate corridors: the east corridor linking India to the Arabian Gulf and the northern corridor connecting the Arabian Gulf to Europe. A key component will be the construction of a railway network, which, when completed, will provide a reliable and cost-effective cross-border ship-to-rail transit network. This will complement existing maritime and road transport routes, facilitating the seamless movement of goods and services between India, the UAE, Saudi Arabia, Jordan, Israel, and Europe.
This groundbreaking project entails the development of essential port infrastructure and the expansion of the railway network from India to the Gulf and onwards to the Mediterranean. It represents a collaborative effort involving India, the UAE, Saudi Arabia, the European Union, France, Italy, Germany, and the United States. The new corridor is expected to enhance efficiency, reduce transportation time and costs, stimulate job creation, and boost throughput via these vital transit routes.
The United States has a track record of endorsing major projects aimed at reshaping global connectivity for the benefit of both Washington and key players in the Middle East and South Asia. One such endeavor was the trans-African Corridor, designed to enhance transportation links between the Katanga province in the Democratic Republic of the Congo (DRC), the copper belt in Zambia, and the port of Lobito in Angola.
The promotion of the IMEC aligns with Washington’s broader objectives, particularly its pursuit of a significant diplomatic breakthrough in the Middle East, particularly between Saudi Arabia and Israel. Additionally, the IMEC is seen as a component of the Partnership for Global Infrastructure Investment (PGII), an initiative aimed at financing infrastructure projects that serve as a counterbalance to China’s Belt and Road Initiative (BRI).
However, it’s crucial to note that Middle Eastern countries have a different perspective on the IMEC. Saudi Arabia and the UAE view it not as an anti-China initiative but as a means to enhance their economic and infrastructure capabilities within the evolving global connectivity landscape, a landscape that has been further influenced by events such as the Ukraine conflict. Furthermore, they see the IMEC as a way to promote the concept of a multipolar world. This decision to participate in the corridor is consistent with Saudi Arabia’s and the UAE’s recent moves to embrace BRICS membership, part of their strategy to construct a multipolar global order. Largely, with the IMEC project, Gulf countries aim to advance their evolving multi-vector foreign policy, emphasizing that exclusive dependence on China has never been their sole strategy. This approach extends to their relations with the United States.
Additionally, the Gulf countries are pursuing their internal agendas through the IMEC. Saudi Arabia, for instance, sees the prospective corridor as dovetailing neatly with its vision of achieving a highly diversified economy by 2030, in line with its Saudi Vision 2030 agenda. For the UAE, participation in the initiative is about opening up the country and its resources to a broader global audience, attracting investment, and increasing its geopolitical influence.
Similar sentiments are echoed in India’s approach to the IMEC. India has long sought to promote new trade routes to counter China’s ambitious projects in Pakistan and the broader Indo-Pacific region. However, for India, the launch of the IMEC holds a sound significance due to its own geo-economic considerations. This corridor represents a long-desired secure connectivity route to the Middle East, a region whose ties have grown increasingly important for India. This growing importance is driven by India’s increasing reliance on Gulf oil and the substantial Indian diaspora residing in the Gulf monarchies. Additionally, India and the UAE recently signed a highly productive Comprehensive Economic Partnership Agreement (CEPA), and the IMEC is expected to further enhance bilateral trade between the two nations.
It’s important to note that India and the Gulf countries are not prioritizing the IMEC over other initiatives. They are actively collaborating with Russia to advance the International North-South Transport Corridor (INSTC). Furthermore, the Gulf monarchies are actively pursuing closer trade and economic ties with China. Trade relations between Russia and India and Russia and the Gulf nations have witnessed significant growth since early 2022, exemplified by the arrival of the first Russia-Saudi Arabia direct freight train in Jeddah via the North-South corridor.
Another driving force behind the new corridor is India’s desire to establish alternative routes to access the EU market. Bilateral trade between India and the EU has been on the rise, with India exporting €70 billion worth of goods to the EU during the 2022/23 fiscal year. New Delhi and Brussels are also engaged in discussions regarding a free trade agreement. Additionally, the EU has a deepening involvement in the Gulf Region, with trade between the two regions reaching nearly US$186 billion in 2022. The EU’s push for closer trade ties with India and the Gulf states has gained momentum, particularly following the outbreak of the conflict in Ukraine, which disrupted trade routes through Russia while expanding the Middle Corridor.
India’s relations with the Gulf Cooperation Council (GCC) are thriving as well. Bilateral trade has surged to US$154.73 billion in the fiscal year 2021-22, up from US$87.4 billion in the previous fiscal year. India’s exports to the GCC experienced a remarkable 58.26% increase to approximately US$44 billion in fiscal year 2022, compared to US$27.8 billion in fiscal year 2021. Specifically, bilateral trade between India and the UAE reached US$84.5 billion in the period from April 2022 to March 2023. These countries have also agreed to settle trade transactions in Rupees and Dirhams, while discussions between the GCC and India regarding a free trade agreement are ongoing. The deepening economic ties between the EU, GCC, and India underpin the impetus to construct a new transportation corridor. Should free trade agreements be forged between India, the EU, and the GCC, a continuous economic and trade link will be established spanning from South Asia to the Mediterranean.
Nevertheless, the IMEC will encounter several formidable challenges. Many aspects of this ambitious project remain to be addressed. For instance, there is a lack of clarity regarding the actual demand along the proposed corridor. Moreover, the complex web of regulations, tax structures, and customs procedures will require extensive harmonization and resolution. The IMEC’s multi-modal nature, encompassing both land and sea sections, poses unique logistical challenges that are more intricate than those associated with purely land-based or maritime routes. Furthermore, the existing route through the Suez Canal will remain a formidable competitor to the IMEC.
Successful new trade corridors often rely on the presence of foundational infrastructure. In the case of the IMEC, Greece, the closest EU country to the corridor’s end points, faces challenges due to poorly developed railways, primarily attributed to mountainous terrain and financial constraints. In the Gulf region, Saudi Arabia and the UAE will need to embark on the monumental task of constructing a railway network across vast deserts, significantly inflating project costs. The financing mechanisms for these infrastructure developments have not yet been clarified by the United States or the EU.
The geopolitical landscape in the region adds another layer of complexity. China, Russia, and Iran may oppose infrastructure projects that could undermine their strategic positions. Additionally, there is no certainty that a viable reconciliation between Saudi Arabia and Israel will be achieved, and relations between the United States and the Gulf countries are not consistently free from tensions.
In nutshell, while the IMEC concept holds promise, there is a considerable amount of work and challenges to overcome before it can be realized. This skepticism is compounded by previous announcements such as the U.S. ‘Build Back Better World’ and the EU’s ‘Golden Gateway’ initiatives, which have raised doubts about the ability to transform the IMEC proposal into a functional reality.
