How Far-Fetched Is The India-Middle East-Europe Economic Corridor?

Is the transcontinental transport corridor between India, the Middle East, and Europe an idea that will acquire shape and substance in the foreseeable future, or will it fizzle out like other such grand announcements?

The memorandum of understanding to establish the India-Middle East-European Economic Corridor, or IMEC, was signed at the G20 meeting in Delhi. It is backed by the U.S., which is a signatory, along with India, Saudi Arabia, the United Arab Emirates, the European Union, Italy, France, and Germany. It will have two components: the east corridor connecting India to the Persian Gulf (or Arabian Gulf, as Arab countries call it); and the northern corridor connecting the Gulf to Europe with railway lines that, upon completion, will provide reliable and cheaper cross-border ship-to-rail transit than existing sea and road transport routes. The MoU also articulates the participants’ intention to lay cables for electricity and communications and a pipe for clean hydrogen export. The project, per the MoU, will result in "transformative integration" of the regions.

The shipping linkages are well established. Saudi Arabia and the UAE are investing in railways, which they have historically neglected. Despite transshipment costs and time, West Asian railway lines will cut transit time between Mumbai and Europe by 40%, an analyst at the Jerusalem Institute of Strategy and Security wrote in an article. The actual gains may fall short, but they are likely to be substantial. 

Near-seamless goods transport through IMEC is predicated on the normalisation of relations between Saudi Arabia and Israel. They do not have diplomatic ties, though the ice is melting. Saudi Arabia did not join the 2020 Abraham Accords that normalised relations between Israel, the UAE, and Bahrain. It is also not part of I2U2, a group comprising India, Israel, the UAE, and the US formed in 2021 for deeper engagement in six areas, including transportation and energy. The US is trying to get Saudi Arabia and Israel to establish diplomatic relations, but success will depend on the Saudis being reassured on security and being allowed to enrich uranium for the production of nuclear power (which the US—and Israel—are wary of). Getting the hard-right Israeli ruling coalition to make meaningful concessions to the Palestinians will also be a tall order.

But Saudi Crown Prince Mohammed bin Salman, or MBS, wants to make his country a cloud computing, logistics, trade, industry, and tourism hub and reduce its dependence on oil. Just earlier this week (Sept. 11), an Israeli delegation from the Antiquities Authority attended a conference of Unesco, the United Nations' cultural organisation, in Riyadh. It was the first open, official Israeli visit to that country.

Israeli Prime Minister Benjamin Netanyahu has hailed the decision to set up IMEC. In a video message, he called it the "largest cooperation project in our history" that will change the face of the Middle East, Israel, and the entire world", news agency PTI reported. 

The US is backing the corridor project as an alternative to China’s Belt and Road Initiative, or BRI—an objective that Saudi Arabia, which is getting closer to China, may not share. Israel itself has thriving trade with China, which, in 2021, was its second largest trading partner ($15 billion), next only to the US ($25 billion), as per the World Bank. China is operating one of its ports and has developed another, despite US concerns. Not so incidentally, in March, India’s Adani group also won a bid to operate the key Israeli port of Haifa.

Differing perspectives on China aside, Saudi Arabia is seeking closer integration with countries in the region. By 2030, it wants to be connected by rail not only to its neighbours but also to Africa and Europe. Though its first railway line was inaugurated in 1951, it did not invest in a network. It now has 2,100 km of freight track (apart from dedicated passenger lines, including a 300 kmph high-speed railway line connecting the holy cities of Mecca and Medina). The plan, according to Saudi Arabia Railways, is to extend links from the Red Sea port of Jeddah to the borders with Jordan, Yemen, and perhaps Egypt.

The UAE, as per the World Bank, had 279 km of freight lines in 2021. Since then, it has expanded the network to 1,200 km, connecting all seven emirates and Saudi Arabia. Etihad Railways says the network will have a capacity of 60 million tonnes of cargo by 2030.

For India, the corridor is a plug-and-play project. Much of the investment will be made by the West Asian countries. But it could leverage the project for greater integration of South Asian economies. Pakistan might also be amenable, as its economy is tottering. In 2003, then-Prime Minister Atal Behari Vajpayee had mooted open borders and, eventually, a common market. If Saudi Arabia can think of ending 75 years of hostility with Israel, there’s no reason why India and Pakistan cannot shed their equally long animosities. Currently, much of their trade is routed via Dubai. But this is hugely expensive. The cheapest way to move goods between India and Pakistan is through the land route. But in 2019, Pakistan halted trade with India in response to its actions in Jammu & Kashmir. Earlier that year, India had imposed 200 percent tariffs on Pakistani imports in response to the Pulwama attack. Both countries have pulled back since then. They traded in goods worth $0.65 million last year, as against $0.83 million in 2019-20. Opening up road and rail routes will spur development across the region by reducing transaction time and costs. Pakistan will get access to East Asia, and India will get access to Central Asia. They will greatly boost the economies of the northern Indian states.