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India-Middle East-Europe Economic Corridor: A Historic Leap in Global Connectivity and Development

By Annunthra K

Image Courtesy: Hindu BusinessLine

Article: 26/2023


In a groundbreaking announcement during the G20 summit, Prime Minister Narendra Modi unveiled the ambitious India-Middle East-Europe mega economic corridor. This transformative initiative brings together a consortium of nations, including India, the United Arab Emirates (UAE), Saudi Arabia, the European Union, and the United States. This is a historic partnership poised to revolutionise economic integration across three continents. The plan consists of two distinct pathways: an eastern corridor linking India to the Gulf Arab states, and a northern corridor establishing connections between the Gulf states and Europe. India, UAE, Jordan, Israel, Greece, Bosnia, Zagreb, Hungary, Austria, Czech, Germany and France are the countries that will benefit under IMEC.

PM Modi expressed the profound significance of this collaborative venture, stating, "today we all have reached an important and historic partnership. In the coming times, it will be a major medium of economic integration between India, West Asia, and Europe." This corridor holds the promise of not only reshaping the economic landscape of the participating nations but also offering a new direction to global connectivity and sustainable development.

At the heart of this initiative lies the Partnership for Global Infrastructure Investment (PGII), a collective endeavour by G7 nations to finance critical infrastructure projects in developing nations. Seen as a strategic response to China's Belt and Road Initiative, the PGII signifies a concerted effort to counterbalance China's extensive infrastructure projects. The India-Middle East-Europe economic corridor, a pivotal component of PGII, is poised to foster increased trade among the involved nations, particularly in the realm of energy products. As experts note, it could emerge as one of the most ambitious counter-strategies to China's far-reaching infrastructure program, which aims to deepen global connectivity with the Chinese economy at its core.

The scope of the corridor is comprehensive, encompassing a rail link traversing the Arabian Peninsula, connecting with shipping routes that extend to India and Europe on either end. By interconnecting railway and port infrastructures throughout West Asia, encompassing nations such as the United Arab Emirates, Saudi Arabia, Jordan, and Israel, this corridor has the potential to accelerate trade between India and Europe by as much as 40 percent, all the while avoiding the need to go through the Suez Canal. Additionally, the project will incorporate an electricity cable, a hydrogen pipeline, and a high-speed data cable. European Commission President Ursula von der Leyen characterised the endeavour as "a green and digital bridge across continents and civilizations," highlighting its dual commitment to environmental sustainability and technological advancement.

Emphasising the historic significance of this agreement, Prime Minister Modi underscored its potential to serve as a dynamic mode of economic integration between India, West Asia, and Europe in the years ahead. Importantly, he stressed that India's vision of connectivity transcends regional borders, with the nation's primary focus being to enhance connectivity with all regions.

This far-reaching strategy demonstrates the United States' reliance on its West Asian allies to curb China's ascent. It also highlights the Gulf states' endeavour to strike a harmonious equilibrium between long standing allies such as the US and burgeoning collaborators like China, given the evolving global order. Meanwhile, Saudi Arabia and the UAE are existing participants in China's Belt and Road Initiative (BRI), while Italy, which had expressed intentions to withdraw from the BRI project, may find itself in a delicate position with regard to both of these routes.

The agreement for the corridor aims to unify India's extensive market of 1.4 billion individuals with western nations. It also serves as a counterweight to China's substantial investments in infrastructure, and stimulates economies in West Asia.

This undertaking is set to present a notable challenge to China's Belt and Road Initiative (BRI), affecting its economy in the process. West Asian countries, particularly Israel, have warmly welcomed this development, highlighting its potential to trigger a transformative shift in the region. Israel plays a pivotal role as a key intersection for this project. Since its establishment in 2013, Xi's Belt and Road Initiative has aimed to connect China, the world's leading manufacturer, with various regions including Southeast Asia, Central Asia, the Gulf, Africa, and Europe via an extensive network of land and sea routes. The IMEC's announcement coincides with ongoing discussions about a potential reconciliation between Israel and Saudi Arabia. Despite the absence of formal diplomatic ties, the Gulf state has recently shown signs of softening its stance towards Israel, notably by allowing Israeli airlines to utilise its airspace. India has consistently opposed the BRI and has abstained from participating. Though this initiative cannot be considered a countermeasure to the Belt and Road Initiative but can be pondered as a way to reduce dependency on China. China has expressed its welcome for the India-Middle East-Europe Economic Corridor, which was announced on the sidelines of the G20 summit. However, China emphasised the importance of ensuring that the corridor does not evolve into a "geopolitical tool." Meanwhile, China played down Italy's intention to withdraw from its BRI.

International North-South Transport Corridor

The International North-South Transport Corridor (INSTC) spans an impressive 7,200 kilometres, constituting a multi-modal transport endeavour. Its primary aim is to streamline cargo transportation across an extensive network of nations, encompassing Afghanistan, Armenia, Azerbaijan, Russia, Central Asia, Europe, India, and Iran. Although established in 2000 and formally ratified in 2002 by India, Iran, and Russia, initial efforts to implement INSTC were hindered by sanctions against Iran.

At the 22nd meeting of the Council of Heads of State of the Shanghai Cooperation Organisation (SCO) in September 2022, Prime Minister Narendra Modi emphasised the importance of cultivating reliable and diversified supply chains within the region.

Image Courtesy: Either View

A key challenge confronting the INSTC initiative lies in the insufficient financial backing for most associated projects. While certain exceptions exist, such as the Azerbaijan and KTI railway lines, the Chabahar Port (India and Iran have jointly agreed to fund USD 80M), and the Ashgabat Agreement transport corridor, major international financial institutions like the World Bank, Asian Development Bank (ADB), European Investment Bank, and Islamic Development Bank have yet to extend the requisite support. This presents a substantial hurdle in realising the full potential of the corridor.

Advantages and Limitations for India concerning IMEC and INSTC

The INSTC holds particular significance for India, driven by two major factors, both of which involve China. The first pertains to India's broader "Connect Central Asia" policy (2013), to signify India's intent for closer ties with the Shanghai Cooperation Organization (SCO) and countries in Central Asia. Under the Modi government, the Act East policy has emerged as a linchpin for economic expansion and regional stability. Notably, the Pakistan-Afghanistan-Uzbekistan (PAKAFUZ) railway project could potentially render the INSTC redundant in terms of India's outreach to Central Asia, thereby diminishing the prospect of these nations later joining the INSTC. An alternative option for India in this regard lies in Israel's transregional connectivity plan, utilising West Asia as a shortcut to access Europe via the Mediterranean. China's gaze on West Asia aligns with a comparable strategy. By securing access through West Asian routes for its trade, China could potentially reduce its dependence on routes through the Indian and Pacific Oceans.

Meanwhile, the IMEC is anticipated to yield a range of substantial benefits, including heightened efficiency, reduced costs, strengthened economic cohesion, job creation, and a reduction in greenhouse gas emissions. This cross-border corridor, encompassing shipping routes and railway networks, is poised to curtail logistics expenses and stimulate trade in both goods and services between the UAE, Saudi Arabia, India, and Europe. A pertinent example lies in India's service sector exports, predominantly directed towards West Asia and Europe, which stand to gain a significant boost.

Moreover, the IMEC presents India with an opportunity to establish hubs for green hydrogen and green ammonia along coastal areas and to become a global manufacturing hub, with the potential to supply these commodities through an integrated shipping and rail network extending to West Asia and ultimately Europe. This corridor will enhance the efficiency and cost-effectiveness of India's exports, bolstering their competitive edge on the global stage.

However, the establishment of an extensive network of railway lines, roads, and port connections across multiple nations demands strategic planning. Moreover, the passage of the corridor through Jordan and Israel adds a layer of geopolitical intricacy, calling for a careful equilibrium between economic and diplomatic strategies. Much like China's BRI, the IMEC is expected to encounter various challenges ranging from the intricacies of coordination with involved nations to financial considerations, geopolitical dynamics, and diplomatic negotiations.

Expert Opinion: Mr. Subramanyam Sridharan, Distinguished Member, C3S

Question: What are your views on the newly launched India-Middle East-Europe Economic Corridor?

Answer: India has worked hard over the last couple of years to fructify this project. There has been solid support from the US, Israel, the UAE and KSA. In a fluid geopolitical situation that confronts the world, the bipolar blocks which were the hallmark of Cold War 1.0 are giving way to a diverse interconnected world. While liberalised trade might have laid the foundations for this situation after the demise of the USSR, it has been the geopolitical situation of the last ten years that has really taken this interdependence to a different higher level. The COVID pandemic has badly shaken up the world from its slumber regarding de-risking, connectivity, synergies etc. The global climate situation, the deleterious effects of which we are all experiencing, has been a decisive factor in nudging us towards net-zero emissions, and green energy. The IMEC seamlessly marries all these aspects into its project scope. The fact that India has excellent non-conflictual, political, diplomatic, trade and civilizational ties with all the countries on the trade route all the way to the destination in Europe ensures the success of the project. As the Indian economy grows in the coming years first to USD 5 Trillion and then further upwards, its millenias-old concept of ”'Vasudhaiva Kutumbakam”, non-interference, agenda and ideology shunning behaviour would guarantee secular growth and prosperity for all.

Question: Will IMEC affect China’s Economy?

Answer: IMEC will not have any effect at all on China's economy. China's economy is already facing multiple challenges emanating from domestic and international headwinds that it is experiencing. Since its 'China Dream' has been sold to the Chinese citizens in the hopes of building a 'wealthy & powerful' (fuqiang) state, and since that is tied inextricably with its international political and economic practices, any negative issue in one affects the other too. More often than not, Chinese history shows that rather than any external shocks, it is the megalomaniacal grand projects by the Emperors that led to their downfall.


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(Ms. Annunthra K is a research officer at C3S. The views expressed are those of the author and do not reflect the views of C3S.)

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