G7 endorses IMEC, India's ambitious answer to China's Belt & Road Initiative: What is it?

Geopolitically, supporting IMEC positions India as an emerging global power, leveraging its economic growth trajectory since 1991 and its role in the G20.

The recently concluded G7 Summit in Italy, which saw the participation of Prime Minister Narendra Modi, came to a close with a commitment to advancing the India-Middle East-Europe Economic Corridor (IMEC) and other infrastructure projects and strengthening strategic ties among the countries despite the tensions in West Asia, which may have delayed the project.

In a communique issued on June 14, the leaders reaffirmed their support for a "free and open Indo-Pacific" grounded in the rule of law. The communique was released following the customary “family photo” at the luxury resort of Borgo Egnazia in Italy.

Moneycontrol outlines in brief the significance of the IMEC:

IMEC: India-Middle East-Europe Economic Corridor Project

Last September, India joined forces with several G20 allies to launch the India-Middle East-Europe Economic Corridor (IMEC) in response to China's Belt and Road Initiative (BRI) initiated in 2013, criticised for its lack of transparency and sovereignty concerns.

On the sidelines of the G20 Summit held in New Delhi, India facilitated the economic corridor agreement, involving the US, UAE, Saudi Arabia, European Union (EU), Italy, France, and Germany. The objective is to enhance connectivity and foster economic integration among South Asia, the Arabian Gulf, and Europe.

Notably, later, Israel and Greece also expressed interest in joining the IMEC project, underscoring its significance in regional connectivity and economic cooperation.

Significance of IMEC

India aims to bank on its strong trade ties with the Arab Gulf region, anticipating significant growth potential once infrastructure and connectivity challenges are addressed - goals directly addressed by IMEC.

The IMEC enhances regional connectivity and economic attractiveness by linking key partners like Israel and Jordan, crucial to India's broader regional strategy. It also promises shorter trade routes between India, the Eastern Mediterranean, and Western Europe, bypassing critical checkpoints like Bab al-Mandab and the Suez Canal.

India's footprint in the region is poised to expand, offering opportunities for Indian firms to invest in infrastructure development.

Geopolitically, supporting IMEC positions India as an emerging global power, leveraging its economic growth trajectory since 1991 and its role in the G20.

This ambitious infrastructure project, linking India with West Asia and Europe, could significantly enhance economic integration with Gulf nations, other regional states, and Europe.

The corridor aims to establish rail links across Middle Eastern countries, connecting them to Indian ports to facilitate efficient energy and trade flow from the Gulf to Europe, reducing shipping times, costs, and fuel consumption.

Also Read | War of the Roads: India-Middle East-Europe corridor conceived to counter China’s BRI

IMEC Roadblocks

The IMEC project has been encountering significant hurdles, especially amidst flaring up geopolitical tensions in the Middle East.

The recent Hamas attacks on October 7 and the ongoing Israeli assault on Gaza pose significant challenges to the IMEC. Projects connecting Jordan with Israel are likely to face strong opposition from the Jordanian public, particularly the Palestinian population. The Jordanian government has openly criticised Israel's military actions in Gaza, further complicating prospects for such infrastructure initiatives.

Efforts towards normalisation between Israel and Saudi Arabia have been halted indefinitely, posing uncertainty over the future of the IMEC.

Despite these challenges, India's recent voting patterns in the United Nations General Assembly, where it supported Israel, suggest that the current geopolitical crisis may not significantly impact relations between New Delhi and Tel Aviv.

Many observers believe that the IMEC could have mitigated disruptions caused by tensions in the Red Sea region, such as the attack by Yemen’s Houthi rebels, which resulted in substantial shipment delays.

One of the practical economic challenges facing the IMEC is the lack of manufacturing hubs in the Arabian Gulf countries. This situation could lead to higher freight costs, particularly if shipments need to return empty, as highlighted by a JNU Associate Professor.

Besides, the IMEC excludes significant regional economies in the Middle East such as Turkey, Egypt, and Iran, as well as smaller yet dynamic economies like Iraq, Qatar, and Kuwait. This limits the potential for comprehensive economic integration within the corridor.

Also Read | India's economic corridor to Middle East and Europe 'different' from China's BRI

Can China pose a threat to IMEC?

Despite the US' efforts to promote the IMEC as a counter to China's BRI, China already holds considerable influence along the proposed route of the IMEC.

A critical node in the IMEC is the Greek port of Piraeus, Eastern Europe's largest port, which is slated to receive cargo from Israel's Haifa port.

Since 2016, the Chinese shipping company Cosco has owned a two-thirds stake in Piraeus, granting it significant control over the port's operations, including piers and terminals, as noted by the Carnegie Endowment for International Peace.

Moreover, strong financial ties between China and the Arab Gulf nations could pose challenges for the IMEC's future. China-Saudi Arabia trade surpassed $106 billion in 2022, nearly double the value of US-Saudi trade. Additionally, China holds a 20 percent minority stake in Saudi Arabia's largest port, the Red Sea Gateway Terminal. In the UAE, non-oil trade with China amounted to over $72 billion in 2022, with China also investing in numerous development projects in the region.