IMEC – Challenges and future

Why in News?

Recently, India’s National Security Council Secretariat hosted envoys and officials to discuss progress on the India-Middle East-Europe Economic Corridor (IMEC).

What is IMEC?

• IMEC – The India-Middle East-Europe Economic Corridor (IMEC) is a proposed infrastructure project.
• Announced during – The G20 Summit held in New Delhi in 2023.
• Members – United States, UAE, Saudi Arabia, France, Italy, Germany, Israel, Jordan and the European Union.
• Aim – To stimulate economic development through enhanced connectivity and economic integration between Asia, the Arabian Gulf, and Europe.

• Two corridors — India-Gulf and Gulf-Europe
•  India-Gulf – It will carry container traffic from India’s western ports to the UAE.
  • From where high speed freight railway will carry goods across the Arabian Peninsula (UAE, Saudi Arabia, Jordan) until the port of Haifa in Israel.
• Gulf-Europe – It will see cargo being shipped from Haifa to ports in Greece and Italy.
  • From where Europe’s well-established train networks will take goods to their final destinations across the continent.

What are the ambitions of IMEC?

• Reduce travel time – IMEC is expected to cut shipping time from India to Europe by about 40% when compared to the Red Sea route.
• Establishment of agreements – IMEC gave way to normalisation agreements and rapprochements that prioritised regional economic growth.
• Conflict resolution – It may solve years of conflict along ideological and geopolitical lines between
  • Qatar-GCC
  • Iran-Saudi Arabia
  • Arab states-Israel
• Potential for minilateral agreements – The Arab normalisation with Israel, which Saudi Arabia was set to join, was yielding enough geo-economic gains for Arab states.
• It can overlook the Palestine question and explore minilateral arrangements with Israel like the I2U2 with India.
• Envisage new route – IMEC allowed India and its Middle Eastern, American, and European partners to envision a new corridor between India and Europe.
• Increase in trade – The EU is India’s largest trading partner with bilateral trade in FY 2023-24 at $137.41 billion.
• The non-oil trade between India, the UAE and Saudi Arabia has increased significantly in recent years.
• Trade facilitation and accessibility – The IMEC will address several issues that continue to persist till date, including
  • No corridor-wide tariff standardisation
  • Low financial integration among corridor partners
  • Lack of corridor-wide insurance
  • Widely differing port capacities.
• Future prospects – Its implementing partners would lay cables for electricity and digital connectivity, pipes for clean hydrogen export.
• It would increase efficiencies, reduce costs, enhance economic unity, generate jobs, and lower greenhouse gas emissions.

What are some key challenges faced by IMEC?

• Israel – Palestine conflict – The single most important issue is Israel’s increasingly unpopular war on Gaza, which has killed at least 61,000 people.
• The IMEC’s cornerstone is the Middle East-Europe connection, between Jordan and Israel.
• Jordan-Israel issues – The relations are presently at a significant low, and are worsening due to the Israeli-American push for Jordan to absorb more of the Palestinian population
• Saudi-Israel tussle – The potential for Saudi-Israel normalisation is much lower today than in 2023.
  • For Instance, Riyadh has doubled down on the need for Israeli concessions towards Palestine while Israel’s desire to accept a Palestinian state is at a historic low.
• Israel’s domination – Israel is presently focused on formally re-occupying and potentially re-settling the Gaza Strip, despite intensifying global opposition.
• The direct impact of Israel’s endless war is the worsening of even those challenges which could be mitigated through reconciled trade practices between stakeholders.
  • For instance, while the Houthi attacks on Red Sea shipping justified the need for the IMEC as a more secure alternative, the expansion of Israel’s war demands high insurance premiums for any trade transiting the region.

What could be done to make IMEC stronger?

• Trade development – India is Saudi Arabia’s second largest trading partner and both states have had a strategic partnership since 2010.
• These partnerships have should be developed to yield several instruments to bolster connectivity.
• Improving India’s presence – Progress on the IMEC corridor is very much possible for India.
  • For instance, Riyadh and Abu Dhabi both allow the use of UPI for fund transfers and remittance payments, improving the potential for digital connectivity along the IMEC route.
• Reducing the Saudi domination – The Saudi need to undercut the Emirati economic dominance of the region continues.
  • For example, in 2021, Riyadh imposed new tariffs specifically on those GCC states that have “free zones” offering preferential tax and customs treatments.
• Improving regional stability – In the long term, for the IMEC to be realised in its originally envisioned form, a secure and stable Middle East is an imperative.
  • For instance, as long as principal issues such as that of Palestinian statehood are not addressed, any regional connectivity plan will inevitably be susceptible to renewed conflict.
• Addressing sustainability challenges – It could be mitigated through commitment and investment from all stakeholders.
  • For instance, in September 2023, participants explicitly agreed to meet within sixty days to develop and commit to an action plan with relevant timetables.

Reference

The Hindu| IMEC - challenges and future