IMEC’s Road Ahead

May 3, 2024 Topic: Economics Region: Asia Tags: IMECIndiaEuropeTradeInfrastructureGulf States

IMEC’s Road Ahead

The Gaza War can’t stop the economic convergence of India, Europe, and the Middle East.


As the global economic and geopolitical landscape undergoes a significant transformation in the 2020s, the intricate interplay of commerce, politics, and strategic ambitions across India, the Middle East, and European economies is taking center stage. At the heart of this shift is the emergence of the India-Middle East-Europe Economic Corridor (IMEC)—a bold economic initiative that bridges the dynamic economy of India, the resource-abundant Middle East, and the technologically sophisticated countries of Europe. By establishing a lattice of trade pathways, infrastructure developments, and digital links in a free and open paradigm, IMEC is set to transform these regions and create new opportunities for collaboration and mutual prosperity.

Yet this broad, ongoing transformation is not without its flaws or disruptions. The October 7 terrorist attacks and the resulting Israel-Hamas conflict, for instance, have arrested the progress toward Israel and Saudi Arabia rapprochement, along with the former’s integration into IMEC. However, despite the Gaza situation, Israel-Iran hostilities, and other challenges, India and the Gulf nations remain bullish on the project as a means of advancing their own national interests. Prudence and pragmatism call for the United States and Europe to match this enthusiasm. The IMEC project is momentarily hindered but by no means derailed—its economic and political tailwinds are strong and will only grow stronger.


The Drivers of IMEC

At the forefront of the ongoing shift in geopolitics is India, projected to become the decade’s fastest-growing G20 economy and poised to be the world’s third-largest economy by its conclusion. This economic upsurge is paralleled by the Gulf states, which, buoyed by unprecedented windfalls from the West’s sanctions on Russia and a desire to move beyond domestic fossil fuel dependencies, are looking to diversify and reinvent themselves as trading hubs. The desire for economic diversification is not isolated; the United States and Europe, rushing to reduce reliance on China and reorient their supply chains, are eagerly exploring alternative partnerships, particularly with India and Gulf nations.

The conceptualization and launch of IMEC at the 2023 G20 Summit in New Delhi underscore a collective commitment to this trajectory, with countries from all three regions signing on. This diversity of participation makes it a genuine multilateral initiative focused on advancing the national interests of all signatories without any one dominant actor. Its member states are financially capable of undertaking strategic investments along the Indo-European commercial axis without relying on external investments or undertaking unsustainable debt.

Compounding this is that IMEC members are engaged in bolstering economic ties among themselves and across the region. Take, for example, the UAE and Saudi Arabia, which are aggressively pursuing bilateral trade agreements with several nations. The UAE has been particularly active, having signed agreements with India, Indonesia, Israel, and Turkey, with several more in the works. The country’s non-oil trade hit over $900 billion in 2023, and a recent agreement with India eliminated or reduced tariffs on 80 percent of products, leading to projections that bilateral trade between the two will hit $100 billion by the end of the decade. For its part, India recently signed a trade deal with Norway, Switzerland, Iceland, and Liechtenstein and is in negotiations with the EU and UK respectively to do the same. Other examples abound. The EU, in addition to India, is engaged in trade negotiations with Indonesia, the Philippines, and South Korea, among others. Saudi Arabia has committed $20 billion to expand its national rail network. Both Indian and UAE companies are aggressively pursuing investments in strategic ports across the region. A consortium of European, Middle Eastern, and Indian telecommunication companies just completed laying an advanced sub-sea Blue-Raman fiber-optic cable connecting Italy to India with an overland hop across Israel and Saudi Arabia.

Moreover, given how geographically dispersed these countries are, it is limiting and shortsighted to expect that IMEC will be restricted to one single passageway. As seen with the ongoing blockade of the Red Sea by Yemen-based Houthis, the main route through the Suez Canal is already a transit choke point. Moreover, it is also likely to be perpetually overwhelmed by a projected increase in transcontinental trade. As a result, various countries are pushing for the development of alternative trade routes. Saudi Arabia, for instance, is keen to develop its national road and rail network to diversify its economy and enable land transit between the Arabian and Mediterranean Seas. Turkey, meanwhile, is proposing additional land transit routes across Iraq and Anatolia to Europe. In short, a mix of market forces and national strategic interests will determine optimum allocation across the existing and proposed commercial thoroughfares. This may even spawn additional avenues that have not yet been conceived.

Overall, in the present geopolitical context, IMEC offers a transformative play to bind the Indo-Pacific and Med-Atlantic economies together and bolster the economic security and resilience of all involved. For India and G7 countries, IMEC offers the most promising riposte to China’s Belt and Road Initiative (BRI). For the Gulf nations, IMEC bolsters the leverage these states have in their business dealings with both G7 (plus India) and China. Looking more broadly, IMEC also presents a future opportunity for integrating the economies of resource-rich East African countries such as Kenya, Mozambique, and Tanzania with that of India and Europe. Likewise, in the future, IMEC—or an extension of it—holds similar potential for integrating landlocked Central Asian republics into the burgeoning Indo-European commerce through the Caspian and Black Seas.

Concerns with IMEC

There is, understandably, some healthy skepticism surrounding IMEC, often arising from a too-literal and myopic comprehension of the endeavor.

Most of these criticisms focus on broad concerns over the financial and physical feasibility of a ports-rail-ports physical corridor, whereby goods shipped from India to the UAE are then transferred on land. These goods are then transported on new rail networks across Saudi Arabia and Jordan to Israel’s Mediterranean ports and then shipped to Europe. While critics charge this is less efficient than simply shipping goods by sea, the blockade of the Red Sea demonstrates that there is a clear need for infrastructure and trade alternatives to avoid the risk of single points of failure, such as the Suez Canal. Otherwise, trade must be redirected around the entirety of Africa, significantly raising both costs and shipping times.

Additionally, it should be noted that even greater disbelief and distrust confronted China’s BRI at its inception. By comparison, IMEC enjoys stronger economic and political fundamentals than BRI. It may have the disadvantage of depending upon collective action to succeed, but it is also a strength; the project can continue even if one or two key actors reduce their involvement.

It is in this broader context that the Gaza conflict and recent Israel-Iran flare-up, unfortunate as it is, presents a momentary hurdle but not an unsurmountable barrier to increasing convergence among Indian, Middle Eastern, and European economies. It is certainly true that many Gulf states (among others) interested in normalizing relations with Israel have vocally condemned Jerusalem’s actions in Gaza. At the same time, however, these governments have notably not been as diplomatically and economically castigating as they could be. Moreover, they actively cooperated in offering an integrated air shield to neutralize recent Iranian drone and missile attacks on Israel. Regional governments seem to be hedging, signaling that diplomatic normalization remains a possibility, provided that the matter of Palestine is addressed properly.

That the geopolitical and economic trends driving IMEC are strong enough that they can survive the darkest days of the Israeli-Palestinian conflict and unprecedented Iranian attacks on Israel is a testament to how invested various states and parties are in the project’s long-term success.

What Can Be Done to Help IMEC Succeed?

For the United States, IMEC represents not merely a series of investments or policy adjustments but a strategic reorientation. It is the fruition of its strategic investments in the Middle East made over the past few years, including the Abraham Accords, which led to the normalization of Israel-UAE relations (pre-October 7) and establishing the India-Israel-U.S.-UAE (I2U2) coordinating forum, which helps mobilize private capital and catalyze regional infrastructure and economic development. More broadly, IMEC advances U.S. strategic interests by strengthening economic ties between its closest economic and security partners (NATO and the Indo-Pacific Quad) and providing a new playbook in the Middle East by directly addressing the region’s economic aspirations. The strategic reorientation provided by IMEC is critical to countering Beijing’s aspirations for economic dominance and fostering more resilient global supply chains, a need starkly highlighted by the coronavirus pandemic. The strategic vision underpinning IMEC, with its emphasis on economic security, regional development, and the integration of diverse economies from East Africa to Central Asia, from Europe to India, offers a blueprint for a more interconnected and prosperous world.

The forthcoming G7 Summit in Italy presents a critical juncture for advancing IMEC’s objectives and solidifying the framework for this ambitious initiative. First, the G7 should adopt IMEC as the flagship project of its Global Partnership for Infrastructure Initiatives. Second, IMEC members should invite remaining G7 nations to formally sign onto the initiative, particularly Japan, as this would significantly enhance the corridor’s strategic depth and operational viability. Third, an IMEC secretariat should be established to enhance coordination among member nations. Given India’s economic and geographical centrality to the initiative, policymakers ought to seriously consider it as the best place to house the Secretariat, along with standing working groups for industry engagement and coordination among development finance institutions of member nations. Fourth, IMEC members should consider hosting an annual business forum, rotating among India, the Middle East, and Europe to engage and motivate the private sector.