EDITORIAL 1: How Gaza war delayed IMEC
Context
Earlier this week, India’s National Security Council Secretariat hosted envoys and officials from the United States, UAE, Saudi Arabia, France, Italy, Germany, Israel, Jordan and the European Union, to discuss progress on the India-Middle East-Europe Economic Corridor (IMEC).
The IMEC
- The IMEC was announced during the G20 Summit held in New Delhi in 2023 to stimulate economic development through enhanced connectivity and economic integration between Asia, the Arabian Gulf, and Europe.
- The IMEC comprises two corridors — India-Gulf and Gulf-Europe.
- Its eastern leg will carry container traffic from India’s western ports to the UAE, from where high speed freight railway will carry goods across the Arabian peninsula (UAE, Saudi Arabia, Jordan) uptil the port of Haifa in Israel.
- The second leg will see cargo being shipped from Haifa to ports in Greece and Italy, from where Europe’s well-established train networks will take goods to their final destinations across the continent.
- Overall, the IMEC is expected to cut shipping time from India to Europe by about 40% when compared to the Red Sea route. But since being announced, progress has been limited.
The corridor’s ambitions
- In September 2023, during India’s G20 Presidency, the IMEC’s conceptualisation and agreement was a testament to a remarkable period of stability in the Middle East.
- Years of conflict along ideological and geopolitical lines (Qatar-GCC, Iran-Saudi Arabia, Arab states-Israel) had given way to normalisation agreements and rapprochements that prioritised regional economic growth.
- The economic underpinnings of the idea remain firm. The EU is India’s largest trading partner with bilateral trade in FY 2023-24 at $137.41 billion, and non-oil trade between India, the UAE and Saudi Arabia has increased significantly in recent years.
- The IMEC itself was meant to be more than a trade corridor. Its implementing partners would lay cables for electricity and digital connectivity, pipes for clean hydrogen export to increase efficiencies, reduce costs, enhance economic unity, generate jobs, and lower greenhouse gas emissions.
Key challenges
- From the perspective of trade facilitation and accessibility, the IMEC was meant to address several issues that continue to persist till date, including no corridor-wide tariff standardisation and low financial integration among corridor partners, lack of corridor-wide insurance, and widely differing port capacities.
- The ambitious cross-Saudi/UAE railway meant to transit goods between the corridor’s sea-legs was also significantly under-developed.
- However, these presented benign modality and sustainability challenges which could be mitigated through commitment and investment from all stakeholders.
Gaza poses fundamental challenges
- The underlying economic logic of the IMEC remains. However, its challenges have evolved from reconcilable to fundamental.
- The IMEC’s cornerstone is the ‘Middle East-Europe’ connection, between Jordan and Israel.
- Unlike in 2023, Jordan-Israel relations are presently at a significant low, and are worsening due to the Israeli-American push for Jordan to absorb more of the Palestinian population.
- Similarly, the potential for Saudi-Israel normalisation is much lower today than in 2023. Riyadh has doubled down on the need for Israeli concessions towards Palestine while Israel’s appetite to concede a Palestinian state is at a historic low.
- In fact, Israel is presently focused on formally re-occupying and potentially re-settling the Gaza Strip, despite intensifying global opposition.
- For instance, while the Houthi attacks on Red Sea shipping vindicated the need for the IMEC as a more secure alternative, the expansion of Israel’s war bodes high insurance premiums for any trade transiting the region.
Future of IMEC up in the air
- While the western leg of the corridor is unlikely to materialise in the near future, the IMEC’s eastern leg benefits from the strategic partnerships that India has forged with the Arab states.
- While India’s economic and strategic relationship with the UAE has the most depth, India is Saudi Arabia’s second largest trading partner and both states have had a strategic partnership since 2010.
- Consequently, for India, progress on the IMEC corridor is very much possible. This is despite internecine issues between Arab states over trade modalities. The Saudi need to undercut the Emirati economic dominance of the region continues.
Way forward
- In the long term, for the IMEC to be realised in its originally envisioned form, a secure and stable Middle East is an imperative.
- This implies that if the IMEC was seen as the fruit of the region’s unprecedented stability in 2023, the regional architecture that brought about this stability will have to be recreated.