India-Middle East-Europe Economic Corridor may get delayed over Gaza war

The ambitious India-Middle East-Europe Economic Corridor was announced on the margins of the New Delhi summit of G20 countries.

The ambitious India-Middle East-Europe Economic Corridor (IMEEC) announced on the margins of the New Delhi summit of G20 countries may get delayed as a consequence of the ongoing war between Israel and Hamas, according to experts.

Back in September, India brought the US, UAE, Saudi Arabia, European Union (EU), Italy, France, and Germany to the economic corridor agreement with an aim to foster connectivity and economic integration between South Asia, the Arabian Gulf, and Europe. The new economic corridor is seen as an alternative to China’s controversial Belt and Road Initiative (BRI).

"I think whenever a project of this scale is considered, the Middle East tensions would have been taken into account, but I am sure it will get delayed, there will be some impact," Mayank Jha, Senior Economist at HDFC Bank said.

The success of the proposed economic corridor depends on the relationship between Israel and Saudi Arabia improving, but with the conflict escalating between Tel Aviv and Gaza, the future of this flagship project is looking grim. The IMEEC will take a backseat, according to N R Bhanumurthy, Vice-Chancellor of the BR Ambedkar School of Economics.

As Prabal Sen, Research Analyst at ICICI Securities points out, "If the Saudi - Israel deal had progressed it would have been the dehyphenation of Saudis and Russia, which would have been an important win for not only the US but also for energy markets. The economic corridor gets held up, but the deal getting done and dusted right now will keep Russia and Saudis as natural allies in the global energy markets."

These experts spoke to Moneycontrol during a virtual panel on October 10 discussing the Israel-Gaza conflict.

In what was seen as a step towards normalisation of relationships between the Arab world and Tel Aviv, the US helped broker the Abraham Accords under former President Donald Trump. The Accord established diplomatic ties between Israel and the Gulf States of Bahrain and the United Arab Emirates. Israel later signed agreements with Morocco and Sudan as well.

It was followed by Saudi Arabia and Israel earlier this year initiating talks to normalise diplomatic ties between them backed by the US. However, experts believe the escalation of the conflict between Israel and Gaza could jeopardise these efforts and consequently impact the proposed economic corridor.