IMEC CORRIDOR: PERKS AND PROBLEMS OF A NEW TRADE ROUTE
FORECASTED EFFECTS OF CONNECTING SOUTH ASIA, THE MIDDLE EAST, AND EUROPE
VIKAS KASHYAP (GUEST AUTHOR @ DIL)
PANGAEAN PERSPECTIVES
Over the years, economic corridors have played a vital role in shaping history.
The ancient Silk Road, which spanned over 6,400 kilometres, connected East Asia to Europe, exchanging goods, ideas, and cultures, between civilisations (Kurin, 2002). The discovery of the Cape of Good Hope in the 15th century influenced the socio-economic and cultural dynamics of respective regions (Gwaindepi & Fourie, 2020). The opening of the Suez Canal in 1869 created a direct link between the Mediterranean Sea, and the Indian Ocean, which revolutionised global trade, by reducing travel time for maritime shipping.
The development of the new India-Middle East-Europe Economic Corridor (IMEC) holds a similar vision and could spark geopolitical change, advancements in global trade, and connectivity (Rizzi, 2023). The IMEC is designed to connect South Asia to Europe, through the Middle East, providing a modern trade route that evades traditional chokepoints like the Suez Canal. The project is predicted to impact not only global economic patterns but also to counterbalance China’s ambitious Belt and Road Initiative (BRI), to address growing and strategic competition in Asia.
A NEW DEAL FOR THE 21ST CENTURY
The concept of the IMEC was first proposed during discussions at the 18th G20 Summit in Delhi (in 2023), where leaders from India, the United States, Saudi Arabia, the European Union, the United Arab Emirates, and other nations, signed a Memorandum of Understanding (MoU) to establish the corridor.
As mentioned, the premise is to connect South Asia, the Middle East, and Europe. Plans involve the development of a multimodal transportation network, consisting of railways, highways, and maritime shipping routes. The corridor will stretch from India, pass through the Arabian Peninsula, and ultimately reach Europe. As a result, new links, between some of the world's most dynamic and rapidly growing economies, will emerge.
An important feature of the IMEC involves its focus on reviving and modernising historical trade routes. Unlike traditional trade routes that pass through Turkey or the Suez Canal, the IMEC offers a truly fresh path, avoiding areas of congestion, and mitigating risks associated with political instability. The corridor will connect the Arabian Sea with the Mediterranean Sea, providing a promising and direct bridge, bypassing the narrow and vulnerable Suez Canal.
THE IMEC’S STRATEGIC AND GEOPOLITICAL SIGNIFICANCE
The strategic and geopolitical impact of the IMEC cannot be understated. Its conceptualisation is part of broader geopolitics. In the context of ongoing competition between the world’s major powers, the corridor represents a strategic response to China's Belt and Road Initiative (BRI) (Rajagopalan, 2023). The BRI, launched in 2013, is a vast infrastructure project that aims to connect Asia, Europe, and Africa, through a network of railways, highways, and ports. Although the BRI has successfully augmented China's influence, it has also faced criticism, for contributing to debt dependency, and for undermining the sovereignty of participating countries (McBride et al., 2023).
The IMEC presents an alternative to the BRI, providing countries in South Asia, the Middle East, and Europe, with options for economic development and regional cooperation. It seeks to reduce dependence on the BRI and represents an infrastructure network with greater balance. The BRI, referred to as ‘One Belt One Road (OBOR)’ in China, as well as the international North-South Corridor, share the IMEC as a threat (Vohra, 2023). The latter’s key players are Iran, Russia and Turkey; during the Ottoman Empire, the North-South Corridor was pivotal in joining Asia with Europe. However, the North-South Corridor has been neglected over time, due to larger geopolitical games and national powerplay. Therefore, the IMEC could be seen, by some, as a complication in understanding trade.
THE IMEC’S INTERCONNECTED GRID PROJECT
The Interconnected Grid Project is a component of the IMEC. It will attempt to transform approaches to expanding renewable energy infrastructure. How exactly? Regions with the highest solar potential, such as West Asia, will be tied, fostering efficient energy exchange, and reducing the need for costly battery storage. The grid’s interconnectivity will enable countries to import renewable energy during low production periods, thereby improving the reliability of their energy supply (Suri et al., 2023). On the flip side, the utilisation of excess solar energy, generated during peak periods, will be enhanced, boosting profitability for suppliers. Hence, the IMEC could be regarded as a respectable mission by environmentalists, and as a strong statement for a more sustainable future.
For West Asia, the grid could increase renewable energy output, which has lagged behind the region’s high solar potential. The grid’s breadth of market access could lead to commercial investments in renewable energy projects, and contribute to diversifying the sustainability mix of countries such as the UAE, Saudi Arabia, and Israel. The grid could also turn India into a global green energy transition leader; it demonstrates the alignment with the International Solar Alliance’s ‘One Sun, One World, One Grid’ vision (Suri et al., 2023).
The IMEC corridor could be seen as a pioneering model, showing how interconnected grids can facilitate a resilient energy future across regions. The proposed green hydrogen corridor, contained within the IMEC, could strengthen the region's energy transition, by addressing the two critical challenges of demand and cost. By establishing a cross-border market for green hydrogen, the corridor could stimulate industrial demand, and drive down production costs through shared technological advancements. Such collaboration could position IMEC countries as global leaders in the emerging green hydrogen economy, that make substantial contributions, to deep decarbonisation and energy security, globally.
THE IMEC’S (POSSIBLE) ECONOMIC EFFECTS
The economic potential of the IMEC is vast. The IMEC could boost trade, investment, and economic growth across South Asia, the Middle East, and Europe. Enhanced connectivity could mean a smoother flow of goods, services, and people, across borders. Also, positive contagion and multiplier effects could materialise for neighbouring and related regions. Moreover, there could be further investment in projects relating to transport and energy, where such decisions would lessen unemployment, magnetise opportunists, and promote innovation (Suri et al., 2023).
Evidently, the IMEC is a significant step towards reliable and lucrative market access. The curtailment of costs and time-based inefficiencies, typically associated with the realities of trade, could elevate the competitiveness of European exports, and bolster economic ties for the better.
A NOTE ON THE MIDDLE EAST’S INSTABILITY
The Middle East is geopolitically unstable. Recently, tensions between Israel and Hamas have escalated. On 7th October 2023, Hamas launched a surprise terrorist attack on Israel, triggering a full-scale and destabilising conflict in the region. Subsequently, Israel's declaration of war against Hamas has put pressure on nearby countries, including Saudi Arabia, to take sides in a polarising and inhumane conflict. This has complicated efforts to establish necessary cooperation, between Saudi Arabia and Israel, for the successful implementation of the IMEC (Vohra, 2023). Also, Yemen’s Houthi rebels, and Iran’s Hizbullah movement (based in Lebanon), are other chaotic elements to assess.
Until such situations are normalised and alleviated, the IMEC project will continue to draw scepticism. That’s because, the IMEC will contain volatile regions in the Middle East, which are vulnerable to terrorist attacks. Simply put, war is poor for (ethical) economics.
CORRIDOR CONCLUSIONS
The IMEC corridor is a strategic pledge for greater connection between a few of our world’s most important regions. It could improve global trade, create exciting opportunities, and lead to greater regional cooperation (Cafiero, 2023). However, geopolitical instability, regional rivalries, and security risks must be considered throughout the project’s implementation phases. Overcoming these difficulties will require strong leadership, effective diplomacy, and commitment to regional harmony.
Budge up BRI, Silk Road, Cape of Good Hope, and Suez Canal. The IMEC is on the horizon!
REFERENCES
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Gwaindepi, A. and Fourie, J. (2020). Public Sector Growth in the British Cape Colony: Evidence From New Data on Expenditure and Foreign Debt, 1830-1910. South African Journal of Economics, Volume 88, Number 3, pp. 332-355. Available at: https://doi.org/10.1111/saje.12257
Kurin, R. (2002). The Silk Road: Connecting People and Cultures. Smithsonian Institution. Available at: https://festival.si.edu/2002/the-silk-road/the-silk-road-connecting-peoples-and-cultures/smithsonian
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Ministry of External Affairs, India. (2023). Partnership for Global Infrastructure and Investment (PGII) - India-Middle East-Europe Economic Corridor (IMEC). Available at: https://www.mea.gov.in/press-releases.htm?dtl/37091/Partnership_for_Global_Infrastructure_and_Investment_PGII__IndiaMiddle_EastEurope_Economic_Corridor_IMEC
New Zealand Ministry of Foreign Affairs and Trade. (2021). The Importance of the Suez Canal to Global Trade. 18 April. Available at: https://www.mfat.govt.nz/en/trade/mfat-market-reports/the-importance-of-the-suez-canal-to-global-trade-18-april-2021
Rajagopalan, R. P. (2023). The Geopolitics of the New India-Middle East-Europe Corridor. The Diplomat, 7 September. Available at: https://thediplomat.com/2023/09/the-geopolitics-of-the-new-india-middle-east-europe-corridor/
Rizzi, A. (2023). The Infinite Connection: How to Make the India-Middle East-Europe Economic Corridor Happen. European Council on Foreign Relations. Available at: https://ecfr.eu/publication/the-infinite-connection-how-to-make-the-india-middle-east-europe-economic-corridor-happen/
Suri, N., Ghosh, N., Taneja, K., Patil, S. and Mookherjee, P. (2023). India-Middle East-Europe Economic Corridor: Towards a New Discourse in Global Connectivity. Observer Research Foundation. Available at: https://www.orfonline.org/research/india-middle-east-europe-economic-corridor-towards-a-new-discourse-in-global-connectivity
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