A historic announcement of a proposed economic corridor was made at a G20 Leaders’ event on the sidelines of the New Delhi summit. On September 9th, 2023, leaders from the United States of America, the French Republic, the Federal Republic of Germany, the Italian Republic, the United Arab Emirates (UAE), the European Union, the Republic of India, and the Kingdom of Saudi Arabia came together to sign a Memorandum of Understanding (MoU).
The purpose of this MoU is to establish collaboration on the development of the India-Middle East-Europe Economic Corridor (IMEC). Furthermore, no legally binding financial promises were made, and the parties agreed to develop an “action plan” over the next 60 days.
The IMEC will have two distinct corridors: the eastern corridor linking India to the Arabian Gulf and the northern corridor linking the Arabian Gulf to Europe. A new railway is in the works.
Therefore, once completed, it will provide a reliable and affordable cross-border ship-to-rail transit network. The network will bolster existing maritime and road transport routes. It aims to facilitate the smooth transit of goods and services between India, the UAE, Saudi Arabia, Jordan, Israel, and Europe. Cables will be installed for digital connectivity and electricity, along with pipes for clean hydrogen export along the train track.
In the coming decades, the Corridor is set to crucially link the continents, accelerating the growth of the involved parties. Its focus on boosting the rising economic power of India makes it a pivotal force for economic integration. As said by the Indian PM Narendra Modi, “The IMEC would support the economic fusion between India and Europe.”
The creation of this corridor will have a positive impact on regional supply chains, expand trade opportunities, and improve trade facilitation.
Furthermore, it will also encourage a greater focus on the environmental, social, and governmental effects, leading to a fundamental integration of Asia, Europe, and the Middle East. The corridor is expected to enhance economies, reduce costs, strengthen economic cohesion, create jobs, and lower greenhouse gas emissions.
Prospects unveiled by the project
The proposed economic corridor presents a mutually beneficial opportunity for all participants involved. Not only does it offer economic advantages for India, Europe, and Arab nations, but it also offers strategic benefits for the US.
The corridor’s route will facilitate improved connectivity between two of the world’s largest markets – India and Europe. This will create new economic prospects for countries along the route, opening up a wealth of opportunities for growth and development.
For India and Europe
The EU is India’s third-largest commercial partner, making up €88 billion in goods trade in 2021, or 10.8% of all commerce with India. The IMEC aims to streamline the flow of goods and services, making it easier and more viable. India finds a fantastic opportunity to accelerate its economic growth through this initiative.
Simultaneously, Europe has an excellent chance to diversify critical supply chains away from China. In the wake of the Russia-Ukraine war, the corridor will provide the European nations with more economic opportunities in the future.
During the launch of the project, European Commission President Ursula von der Leyen described it as nothing less than historic. Moreover, she emphasized that the corridor will be the most direct connection between India, the Arab, and the Middle East. She added that the train connection will speed up trade between India and Europe by 40%.
For the Middle East
The relevance of the IMEC could be understood by the very fact that India and Saudi Arabia recognized the project as “one of the biggest plurilateral agreements connecting several nations.” The cross-border, ship-to-rail transit corridors are anticipated to achieve two key objectives.
They are expected to lower shipping costs throughout the network and enhance commerce in goods and services between and among the UAE, Saudi Arabia, India, and Europe. Thus, the lower shipping costs also provide an opportunity to diversify the trade to oil-dependent economies like the UAE and Saudi Arabia. The corridor will assist UAE’s target to achieve non-oil trade of $1 trillion by 2031.
For the US
For the US the corridor is much more strategically important than economically. Even though President Biden made a neutral statement about the corridor, the backing of the US to the project can be seen as a counter to the Chinese Belt and Road Initiative (BRI).
According to President Biden, for the participating nations, the corridor would provide “endless opportunities,” “make it much easier to trade [and] export clean energy,” and “lay cable that will connect communities,”. He claimed that it would “contribute to a more stable and prosperous Middle East”.
Amidst Washington’s Arab allies, such as the UAE and Saudi Arabia, strengthening ties with China, the project emerges as a potential deterrent to Beijing’s expanding influence in the area.
The Biden administration seeks to build on the recent normalization of relations between Israel and several Arab states. The planned corridor’s passage through Jordan and Israel may contribute to these efforts. Overall the US intention can be seen as to reaffirm its fading influence in the region.
Tactful Project Appraisal
The project doesn’t favour everyone, neglecting the interests of countries like Turkey or presenting challenges for Russia and China.
In its current shape, the corridor is set to pass through the UAE, Saudi Arabia, Jordan, and Israel before reaching Greece and Europe, bypassing Turkey. “We say that there is no corridor without Turkey,” Erdogan the reporters. “Turkey is an important production and trade base. The most convenient line for traffic from east to west has to pass through Turkey” he added.
Moreover, Italy also signalled its withdrawal from BRI, and China formally welcomed the IMEC while cautioning against it becoming a “geopolitical tool.” Meanwhile, Russia has tried to show a positive viewpoint toward the project.
As Russian President Vladimir Putin while speaking at the 8th Eastern Economic Forum said that the economic corridor will benefit Moscow by developing logistics. Further, he claimed that the US jumped into the “last car” without having much interest in the deal.
THE WAY FORWARD
If the involved parties complete and operate the corridor timely and efficient, it will benefit them economically. The project will bind the markets across the continents more firmly, encouraging more investments and boosting economic growth across the board in all three areas. Providing them with safe loans for the corridor will aid in the development of the countries infrastructure.
The project aims to serve as an alternative to China’s BRI, which many criticized for its debt-trap diplomacy, as seen in the case of Hambantota Port in Sri Lanka. Thus, the project also considers the environmental factor by prioritizing the reduction of greenhouse gas emissions and the use of clean energy. Indeed, India stands to benefit significantly from the project, and it has the potential to boost the economies of all participants and hold numerous future possibilities.
About The Author
By Aman Bora
Aman Bora is currently a Ph.D. Candidate in the Department of Political Science of Soban Singh Jeena University Almora, Uttarakhand (India). He received his master’s degree in Political Science (Silver Medalist) from Kumaun University Nainital in Uttarakhand (India) and has passed the UGC-National Eligibility Test in Political Science subject. He is an ardent researcher and an inquisitive learner avidly interested in International Relations, Defense Studies, Geo-politics and topics related to National Interests.