India and Iran finally signed a 10-year long-term bilateral contract for the operation of Chabahar Port, but before this, the India-Middle East-Europe Corridor (IMEC) was signed on the sidelines of the G-20 summit in New Delhi.

About India-Middle East-Europe Corridor (IMEC) Connectivity Project

• Signed: On the sidelines of the G-20 summit in New Delhi on September 9, 2023 by the European Union, France, Germany, India, Italy, Saudi Arabia, the United Arab Emirates (UAE) and the United States.
• Design and Formulation: Under the Partnership for Global Infrastructure and Investment (PGII), it aims to stimulate economic development through enhanced connectivity and economic integration between Asia, the Arabian Gulf and Europe.
• Corridors: The IMEC will comprise two separate corridors: 
  • Eastern corridor: Connecting India to the Arabian Gulf. 
  • Northern corridor: Connecting the Arabian Gulf to Europe. 
• Railway Network: In addition to existing maritime and road transport routes, it will include a railway network that aims to be a reliable and cost- effective cross-border ship-to-rail transit network for goods and services to transit. 
  • The corridor also envisages along the railway route, the laying of cable for electricity and digital connectivity and a pipeline for clean hydrogen export.

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As A Counter to the Belt and Road Initiative (BRI)

• Aim: This 4,800 kilometre-long IMEC corridor aims to secure regional supply chains, increase trade accessibility and improve trade facilitation across regions.
• Provide Access to Land -Route: Currently, much of the trade between India and Europe is through the Suez Canal as there is no overland access due to Pakistan being located to India’s west overland.
• Reduce Cost of Transaction: The IMEC will also cut down on the time, distance and costs of transit of goods from India to Europe significantly.
  • It is estimated that the time and cost of transporting goods to Europe from India will be reduced by 40% and 30%, respectively.

The Shadow of the Gaza War

• Outbreak of Gaza War: But even before the potential impact of this path-breaking project could be examined by experts, the war in Gaza broke out on October 7 less than a month after its announcement.
• Delayed Implementation: India’s External Affairs Minister acknowledged that the delay in implementation of the IMEC in view of the current situation in West Asia is a matter of “concern” 
  • However, he was confident that work on the project would progress well after the war.
• Missing Links: However, the Gaza war has amply proven that the IMEC has serious missing links in its current form.
• Blocking Access: During the course of this war, the Houthis in Yemen have blocked the ships of Israel and its western allies from access to the Red Sea. 
  • Despite naval deployment by the U.S. Navy and Europe, the Houthis have not been deterred and have successfully targeted those ships.
  • As a result, Israel and its western allies have been forced to take the longer route across the Cape of Good Hope in South Africa, increasing shipping time as well as insurance costs.
• Iran’s Involvement: During the same period, Iran has repeatedly threatened to close the Strait of Hormuz in the north through which most crude oil and natural gas is shipped to other parts of the world, including India.
  • Similar situation happened during the Persian Gulf Crisis in the summer of 2019 which was triggered by the downing of a U.S. drone by the Iranian military. 
• Threat to Safety and Security: During this period, there were repeated incidents of Iran intercepting ships in the Persian Gulf and the Strait of Hormuz. 
  • The Indian Navy had to launch ‘Operation Sankalp’ in order to ensure the safe passage of Indian flagged ships through the Persian Gulf. 
• Disruption in Trade in Israel: In Israel, two of its major ports, Eilat and Haifa, have suffered heavy losses due to disruption in trade through the Red Sea and also the targeting of these critical ports by Hamas and its allies. 
  • A consortium led by India’s Adani Group purchased Haifa port in January 2023, expecting an expansion and an increase in traffic but the Gaza war has put everything on hold.

On Oman and Egypt

• Oman Offers a Way Out: Oman provides the perfect foil to this threat. Its ports open up into the Arabian Sea, well away from direct influence of an Iranian threat. 
  • It also offers the closest and direct link to ports in India. Traditionally too, merchants in Oman and India have traded for centuries through small boats called ‘dhows’ and Oman is considered India’s gateway to West Asia. 
  • Oman is also an acceptable partner politically in the region as it has good relations with all stakeholders, including Israel.
• UAE Remains Unreliable: The IMEC envisages that the ports in the UAE such as Fujairah and Jebel Ali will form the eastern offload points for ships transiting to India. 
  • The problem here is that all the ports of the UAE are located in the Persian Gulf and are well within the Strait of Hormuz. Therefore, they will always be threatened by any conflict situation in the Persian Gulf.
• Egypt Offers a Way Out: Similarly, towards the West, instead of the ports of Israel, there has to be an alternate spur of the IMEC traversing through Egypt and ending at any of its major ports in the Mediterranean Sea. 
  • This will provide a safe and direct sea route to ports in Europe.
  • Egypt is also a major player in West Asia and its inclusion will only help balance out the regional dynamics too.
  • Like Oman, Egypt has good relations within the region and with Europe, Israel and the U.S. In fact, Egypt had quietly voiced its displeasure on being left out of the IMEC and such an extension will not only take care of the politics but also the economics of it.

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Conclusion

Thus, the India-Middle East-Europe Corridor (IMEC) offers strategic trade benefits but faces challenges like regional conflicts and geopolitical threats, requiring careful navigation and alternate routes.

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