On 10th of September, during the G20 Summit hosted in India, the world witnessed a landmark moment that could potentially reshape the course of global trade and diplomacy. They agreed to create the “India-Middle East-Europe Corridor” or IMEC for short.
But what is IMEC and why is it a big deal? Is it really making countries closer to each other? Let’s find out in simple terms.
Table of Contents
IMEC is a project with 2 basic corridors:
INIDA – MIDDLE EAST – EUROPE
The two corridors involved are:
- Eastern Corridor– It will link the eastern part of India to the Arabian Gulf region.
- Northern Corridor– It will connect the Gulf corridor to Europe.
(It will have an electricity cable and a clean hydrogen pipeline to promote clean energy trade between Asia, the Middle East, and Europe.)
Imagine a new trade route, comparable to the famous old Silk Road or Spice Route but with modern technology. This route could really boost trade between India, the world’s largest democracy, and the Middle East and Europe, which have lots of valuable resources.
How is this possible?
- Starting its journey in Mumbai, India, the corridor embarks on a sea route spanning approximately 2,076 kilometers, eventually reaching the UAE.
- In the UAE, the Dubai port, especially the Jebel Ali port, is poised to play a pivotal role in connecting India with this corridor.
- From the UAE, the corridor travels through railways, covering a vast distance of around 5,000 kilometers, passing through Saudi Arabia and Jordan, before arriving in Israel.
- The link will culminate at Port Haifa in Israel. From there it will be connected to Bahrain and Oman through sea route. Then it will be linked to Europe through a rail route.
- Leaving Israel, the corridor once again takes to the sea, entering Europe, traversing approximately 6,000 kilometers to reach Greece making its way. From there, through Greece port PAERUS it seamlessly transitions to roadways, making its way into Europe.
It contains total of 8 countries India, UAE, Saudi Arabia, Jordan, Israel, Italy , Germany, France (covering approx. 8000 KM)
Could this trade route be India’s secret move to outplay China on the global chessboard?
- With countries like Pakistan, Zambia, and Sri Lanka grappling with debt-induced challenges from China’s BRI, the IMEC corridor emerges as a beacon of hope. Not only does it offer a tangible solution to China’s debt trap concerns, but it also aims to balance China’s burgeoning influence in the Middle East.
- The corridor could potentially extend its connectivity, enveloping nations like Thailand, Bangladesh, and Taiwan, thereby broadening its outreach.
What are its benefits to INDIA?
- India takes center stage in this corridor, positioning itself as a key player in global logistics, infrastructure, and communication.
- Connecting UAE’s Jebel Ali to Israel’s Haifa port by railway creates a faster, cheaper route (IMEC) for India-Europe goods transport, cutting Mumbai to Piraeus travel time by 40% vs. Suez Canal.
- It promotes self-reliance through initiatives like “Make in India” and Bharatmala.
Economic Impact and Trade
In 2022, the total trade volume of all eight countries involved in the IMEC project reached a remarkable 10.8556 trillion. This substantial trade volume underscores the project’s potential to significantly reduce transportation costs and time, benefiting trade and economic growth. IMEC is poised to play a crucial role in reshaping global trade and diplomacy by promoting efficient connectivity and trade across the region.
This corridor is expected to reduce the time and cost of transporting Indian goods to Europe by 40 per cent and 30 per cent
- Participants plan to meet over the next two months to develop an action plan and timetables for the IMEC.
- Expected plan is to be finalized by end of 2023
- The IMEC aligns with the US’s Partnership for Global Infrastructure and Investment initiative, focusing on infrastructure investments.
- The US has mobilized significant funding for infrastructure projects and is working to integrate its initiative with the IMEC.
Why is the project being proposed?
- Prosperity and Connectivity: The project aims to boost economic prosperity among the participating countries by facilitating the flow of energy resources and digital communication. It seeks to create a more interconnected and prosperous region.
- Infrastructure Development: Many lower- and middle-income nations lack the necessary infrastructure for sustained growth. This project is expected to address this infrastructure gap, fostering development and economic growth in those countries.
- Stability and Security: By promoting economic cooperation and integration, the corridor could help reduce tensions and instability in the Middle East. It is seen as a way to contribute to regional stability and security.
- Counterbalance to China: The project can be viewed as a counterbalance to China’s global infrastructure initiatives. It is aligned with the principles of transparency and high standards, distinguishing it from what some perceive as China’s more coercive approach to infrastructure development.
- Strengthening G20: This project could also be seen as an effort by the United States, along with other G7 nations, to bolster the G20 group’s influence on the global stage.
Cost-Benefit Analysis of the India Middle East Europe Corridor (IMEC) vs. Existing Routes
|Reduced Transport Costs||Expected to reduce transport costs by up to 30%.||Existing routes have established costs.|
|Increased Trade||Expected to boost trade and investment among India, the Middle East, and Europe.||Existing routes have a proven track record.|
|Improved Connectivity||Enhances connectivity and cooperation among regions, making them more resilient to global challenges.||N/A|
|Infrastructure Costs||Requires significant investment in new infrastructure development (e.g., roads, railways, ports, logistics facilities).||N/A|
|Security and Political Risks||Passes through politically unstable regions like Afghanistan and Iran, posing security and political risks.||Some routes pass through politically unstable regions, potentially causing disruptions.|
|Pros||1. Reduced transport costs. 2. Increased trade and investment. 3. Improved connectivity and cooperation.||1. Well-established and familiar. 2. Lower upfront costs. 3. Existing infrastructure.|
|Cons||1. Uncertain completion timeline. 2. Requires significant infrastructure investment. 3. Security and political risks.||1. Longer and more expensive routes. 2. Increasing congestion. 3. Political risks on some routes.|
|Environmental Impact||Potential environmental impact, including deforestation and habitat loss if not developed sustainably.||Existing routes have their own environmental considerations.|
|Social Impact||Potential social impact, including community displacement and loss of traditional livelihoods.||N/A|
|Security of Supply||Could improve the security of supply by providing an alternative trade and energy route.||Existing routes may be vulnerable to disruption.|
The India-Middle East-Europe Economic Corridor (IMEC) offers several advantages to different countries in the region:
–Improved Regional Ties: Israel’s improving ties with neighboring countries including the UAE, Bahrain, Egypt, and Jordan, position it as a key player in the IMEC. These diplomatic relations create opportunities for Israel to enhance economic cooperation and trade with regional partners.
– Transportation Hub: IMEC will promote connectivity between Israel and its neighbors, making Israel a central transportation hub. It will facilitate the swift movement of goods, necessitating standardization of trucks, drivers’ licenses, and travel passes for efficient border crossings.
–Global Trade Upgrades IMEC will upgrade global trade dynamics in West Asia and bolster Israel’s status as a hub for transporting goods from the Far East to the West. Israel’s strategic location makes it a critical link in this economic corridor.
–US Presence: The IMEC’s development aligns with the U.S.’s interests in the region, allowing the United States to establish a stronger presence and influence in this vital economic network.
- European Union (EU):
– Financial Soundness: The EU sees the IMEC as a financially sound alternative to China’s Belt and Road Initiative (BRI) projects, which often lead to heavy debt burdens for participating countries. The EU prefers a financially stable African Union (AU) in its vicinity over one burdened by Chinese debt.
– Promotion of Regional Trade: IMEC will enhance trade connectivity between the EU and the Middle East, promoting economic growth and trade cooperation. It provides an alternative route for EU trade, reducing dependence on existing routes.
- Saudi Arabia:
– Improved Infrastructure: The IMEC’s development can commence even before formal relations between Saudi Arabia and Israel are established. This infrastructure project holds the potential to bridge the gap between the Far East and Europe, reducing shipping costs and transit times.
– Job Creation- Saudi Arabia sees the project as transformative and a source of long-term job creation. It strengthens trade ties with India.
– Saudi Arabia also signed an agreement with the US to establish a green transit corridor, promoting green energy.
- United States:
– Regional Presence* The U.S. views the IMEC as an opportunity to strengthen its presence in the region. Its support for this corridor aligns with its strategic interests and economic goals.
- Participating Countries:
– Economic Benefits:** All participating countries stand to gain economically from the IMEC. It will significantly reduce shipping costs and transit times, benefitting trade and commerce.
–Improved Connectivity: IMEC will promote connectivity between nations in transportation, infrastructure, and information exchange. Standardization of trucks, drivers’ licenses, and travel passes will facilitate smooth border crossings, streamlining trade and transit.
Environmental Impact: ‘
- It will link, telecommunications and energy grids which will allow reliable access to electricity and enable innovation of advance clean energy and will connect communities through these countries to secure internet
- Will connect the East Indian corridor to the Arabian gulf region and the northern corridor will connect the Gulf corridor to Europe with an electricity cable and clean hydrogen pipeline to foster clean energy trade between Asia, the middle east, and Europe.
The G20 IMEC, or India-Middle East-Europe Economic Corridor, is a proposed new trade and infrastructure corridor that would connect India, the Middle East, and Europe. It is still in the early stages of planning, but it has the potential to have a significant impact on the socio-economic development of the countries and regions involved.
Here are some specific examples of how the G20 IMEC could influence job markets, regional economies, and socio-cultural exchanges:
- Job markets: The G20 IMEC could create new jobs in the shipping and logistics sectors, as new trade routes are established and existing routes are expanded. It could also create new jobs in the construction sector, as new ports, roads, and railways are built. Additionally, the G20 IMEC could boost the tourism sector in countries along the corridor, as more people travel between the regions.
- Regional economies: The G20 IMEC could have a positive impact on regional economies by increasing trade and investment. For example, the corridor could make it easier for Indian businesses to trade with businesses in the Middle East and Europe. This could lead to increased investment in India and other countries along the corridor.
- Socio-cultural exchanges: The G20 IMEC could promote socio-cultural exchanges between the countries and regions involved. This is because the corridor will connect people from different cultures and backgrounds. For example, the G20 IMEC could lead to increased student exchanges between universities in the different regions. It could also lead to increased cultural exchanges, such as art exhibitions and film festivals.
Overall, the G20 IMEC has the potential to have a significant positive impact on the socio-economic development of the countries and regions involved. It could create new jobs, boost regional economies, and promote socio-cultural exchanges.
It is important to note that the G20 IMEC is still in the early stages of planning, and its exact impact on job markets, regional economies, and socio-cultural exchanges will depend on a variety of factors. However, the potential benefits are significant.
An Era of Reimagined Trade
The India-Middle East-Europe Economic Corridor is more than just a trade route. It’s a testament to the changing global dynamics, the evolving power structures, and the relentless pursuit of efficiency in global trade. As 2023 approaches, the world waits with bated breath for the final blueprint of this ambitious corridor.
Will IMEC successfully disrupt the geopolitical paradigm or will it go down as another political lip service?