The Diplomat
Overview
Will IMEC Prove Effective in Containing China’s BRI?
The White House
South Asia

Will IMEC Prove Effective in Containing China’s BRI?

China may not have been present at the IMEC MoU signing event, but it was the elephant in the room in New Delhi.

By Sudha Ramachandran

A new transcontinental digital and transport connectivity initiative, the India-Middle East-Europe Economic Corridor (IMEC), was announced on the sidelines of the recent G-20 summit in New Delhi. In the Indian capital, the leaders of India, the United States, Saudi Arabia, the United Arab Emirates, the European Union, Italy, France and Germany signed a memorandum of understanding (MoU) committing to work together to establish the connectivity corridor.

While neither China nor its Belt and Road Initiative (BRI) was mentioned either in the MoU or by leaders at the signing event, they were no doubt on everyone’s mind. Beijing likely figured majorly in the calculations of the governments that have come together to establish IMEC. 

China may not have been present at the IMEC MoU signing event. But it was the elephant in the room in New Delhi.

A transnational digital and transport connectivity corridor, IMEC envisages linking India with Europe via the Middle East through sea and over land.

According to the MoU, IMEC comprises two corridors – the Eastern Corridor connecting India to the Arabian Gulf, and the Northern Corridor linking the Arabian Gulf to Europe. 

The plan is to “provide a reliable and cost-effective cross-border ship-to-rail transit network to supplement existing maritime and road transport routes – enabling goods and services to transit to, from, and between India, the UAE, Saudi Arabia, Jordan, Israel, and Europe,” the MoU said. Additionally, there are plans to lay electrical and digital connectivity cables as well as pipelines for transporting clean hydrogen. 

IMEC “will secure regional supply chains, increase trade accessibility, improve trade facilitation, and support an increased emphasis on environmental social, and government impacts,” the MoU added.

The corridor is expected to increase efficiency relating to transit, reduce transport costs, enhance economic unity, generate jobs, and lower greenhouse gas emissions.

The initiative is still at an embryonic stage. Details relating to projects, timelines, and financial commitments will be firmed up in the coming weeks, and officials will have to get an action plan ready before a proposed meeting in November.

Governments have been working to prepare the ground for this transnational connectivity initiative for some time. In July 2022, for instance, India, Israel, the UAE, and the United States came together to form the I2U2. IMEC appears to be its “first big deliverable,” wrote geopolitical analyst Harsh Pant. However, the idea of a connectivity corridor through the Middle East emerged even earlier, when China’s influence in the region began growing.  

Indian businessmen and analysts have responded positively to IMEC. 

Stretches of railway in UAE and Saudi Arabia need to be built from scratch or upgraded, and India is eyeing lucrative construction contracts. Additionally, India is looking to create green hydrogen and green ammonia manufacturing hubs along its west coast for export to the Middle East and Europe. New opportunities in the manufacturing sector will go on to increase employment opportunities.

India’s trade with Middle Eastern countries, which is already robust, is bound to grow. Including oil, India’s trade with the UAE stands at $85 billion, making it India’s third largest trading partner and second largest export destination. Saudi Arabia is India’s fourth largest trade partner. However, India has massive trade deficits with both countries, oil imports dominate trade. New Delhi has been looking for ways to diversify its trade with the Saudis and Emiratis. IMEC will facilitate its efforts.

IMEC’s implications for India’s trade with Europe have generated immense excitement. At present, Indian goods are transported to Europe solely via the Suez Canal. This is not only a longer route but also very busy. It takes cargo 18 days to make the journey from Mumbai port to Europe through the Suez Canal. IMEC is expected to reduce this travel time by 40 percent. It will reduce the cost of trading with Europe and make Indian goods more competitive in European markets. 

However, some are calling for tempering expectations. 

Pointing to the benefits of the Suez route, Anil Devli, CEO of the Indian Ship Owners Association (INSA), has said that the “all-sea route is convenient as we are assured that our cargo will land from point to point. It moves seamlessly without any obstructions.” In contrast, cargo transported via IMEC will make use of multiple modes of transport. “The number of times the cargo will get offloaded as it changes hands from ship to rail will increase the handling costs, which include terminal-handling charges, container yard charges and so on. That seems like a bit of a challenge,” Devli was quoted by The Hindu as saying.

The big question is how IMEC will measure up against China’s BRI. Comparisons between the two are unfair, as BRI has had a 10-year head-start. Yet comparisons are inevitable and will grow as IMEC takes shape.

Over the past decade, China has gotten 150 countries and 30 international organizations on board the BRI. It has invested around a trillion dollars in some 3,000 infrastructure projects. IMEC is perhaps just one leg of a larger connectivity corridor network that the United States has in mind. Will it be able to match the BRI? 

Importantly, will IMEC contain China’s growing influence in the Middle East?

If the U.S. believes that it will be able to wean countries away from China and the BRI, it could be mistaken. Of the eight countries that signed the IMEC MoU, three – Saudi Arabia, the UAE, and Italy – are members of the BRI, although Italy announced its exit from the Chinese initiative during the G-20 summit.

Countries like Saudi Arabia and the UAE have been close U.S. allies and India’s ties with Washington are warming. Yet all three countries have strong economic relations with China too. They are also in favor of a multipolar world. 

The Saudis and Emiratis have signed on to IMEC not because they are anti-China or are keen on the American agenda to reduce China’s influence in the region, but because they want to open their economies to more investment and greater economic opportunities, to explore trade and access markets through more corridors and routes. 

Unlike Saudi Arabia and the UAE, India has a troubled relationship with China over their disputed border. But this has not eroded economic ties between the two countries. 

With Pakistan denying India overland access, New Delhi has had to pursue trade via Iran’s Chabahar and Bandar Abbas ports to reach markets in Central Asia and Russia. These trade corridor options, including the International North-South Trade Corridor (INSTC), have largely failed to take off. 

While India will be hoping for IMEC to be more successful than the other corridors it is a part of, it is unlikely to abandon its projects with Iran or withdraw from the Russia-backed INSTC because the United States says so. 

What we are likely to see is India pursuing IMEC in addition to the Russia-backed INSTC. Meanwhile, Saudi Arabia and the UAE will belong to both IMEC and the BRI and it will be interesting to see how they manage their commitments.

Want to read more?
Subscribe for full access.

Subscribe
Already a subscriber?

The Authors

Sudha Ramachandran is South Asia editor at The Diplomat.

Northeast Asia
Japan Marks 100th Anniversary of the 1923 Kanto Massacre
South Asia
Pakistan’s Military is Targeting Smugglers and Hoarders