Date : 19/09/2023

Relevance: GS Paper 2 - International relations

Keywords: Etihad Rail Project, China's Belt and Road Initiative (BRI), Suez Canal

Context-

In the wake of the recently concluded G-20 summit in New Delhi, a landmark Memorandum of Understanding (MoU) was inked, laying the foundation for the ambitious 'India-Middle East-Europe Economic Corridor' (IMEC). This groundbreaking initiative, spearheaded by leaders including Prime Minister Narendra Modi and U.S. President Joe Biden, and supported by nations like Saudi Arabia, the UAE, the European Union (EU), Italy, France, and Germany, seeks to revolutionize trade, transportation, and geopolitics. In this comprehensive exploration, we delve into the blueprint of the IMEC, its potential political implications, its role as a counter to China's Belt and Road Initiative (BRI), and its transformative impact on diplomatic ties, especially between Israel and the Arab region.

Proposed Ports

The IMEC project encompasses multiple routes and several prominent ports have been shortlisted for inclusion. These ports are strategically located along the corridor and serve as vital hubs for the flow of goods and trade. Among the notable ports under consideration are:

• Indian Ports: The west coast of India plays a pivotal role in the IMEC project, with ports such as Mundra, Kandla (both in Gujarat), and the Jawaharlal Nehru Port Trust in Navi Mumbai being prime candidates for connectivity.
• West Asian Ports: In West Asia, at least five ports have been identified for integration with Indian ports. These include Fujairah, Jebel Ali, and Abu Dhabi in the UAE, along with Dammam and Ras Al Khair ports in Saudi Arabia.
• Haifa and Piraeus: The Haifa port in Israel and Piraeus port in Greece are essential components of the IMEC route, serving as pivotal landing destinations for European trade.

Rail Connectivity Development:

Achieving seamless connectivity through rail networks is central to the success of the IMEC project. Several existing and new rail projects are in progress to bridge the gaps in the proposed routes. These include:

• Etihad Rail Project: Phase 2 of the Etihad Rail project focuses on constructing a 605-km rail network extending from the UAE's Fujairah to Ghuweifat on the Saudi Arabian border.
• Missing Links: Critical missing links have been identified, such as the stretch between Ghuweifat and Haradh, and from Qurayyat in Saudi Arabia to Beit She'an in Israel. These segments require fresh construction efforts.
• Lengthy Rail Routes: The total rail route length spanning from Fujairah to Haifa is approximately 2,915 km, with significant portions yet to be linked. Similar challenges are faced on other proposed routes.

Infrastructure Beyond Rail: The MoU also outlines plans for laying cables for electricity and digital connectivity, as well as pipes for clean hydrogen export along the railway route. These initiatives emphasize the corridor's commitment to modernization and sustainability.

IMEC is not just about economic returns; it also offers opportunities for green and sustainable growth. These eco-friendly aspects align with global efforts to reduce greenhouse gas emissions.

Efficiency and Environmental Benefits: The IMEC promises to enhance transit efficiency, reduce costs, create employment opportunities, and lower greenhouse gas emissions. These benefits herald a transformative integration of Asia, Europe, and the Middle East.

Technical Standardization:

To ensure efficient and seamless transportation along the IMEC corridor, adherence to common technical standards is imperative. Key technical points include:

• Uniform Rail Gauges: Trains should run on the same gauge to enable hassle-free rail transport across borders.
• Consistent Technology: Employing similar technologies for engines and other rail-related equipment streamlines operations.
• Container Standardization: Ensuring consistency in container dimensions facilitates cargo handling and reduces logistical complications.

Cost Estimates:

• Developing the IMEC routes involves substantial investments. While initial estimates suggest costs ranging from $3 billion to $8 billion for each route, precise figures remain uncertain at this stage. The complexity of the project necessitates careful planning and assessment of financial requirements.

Geopolitical Considerations:

• The IMEC project, while designed to counter China's Belt and Road Initiative, is not immune to Chinese presence. Notably, the Piraeus port in Greece is controlled by China Ocean Shipping Company, a state-owned Chinese entity. Furthermore, Chinese companies have secured contracts for phases of the Etihad Rail projects.
• As the IMEC gains prominence, it's being viewed as a competitor to China's Belt and Road Initiative (BRI). The project's announcement, however, has not been met with enthusiasm by Chinese media.

Key points of consideration include:

• U.S. Counterbalance: The IMEC can serve as a counterbalance to China's growing influence in regions traversed by the BRI, particularly as traditional U.S. partners in the Arab world deepen their ties with Asian powers like India.
• Trans-Regional Commercial Route: The IMEC offers an alternative trans-regional commercial transportation route, potentially supplanting the Chabahar-based International North-South Transit Corridor. This route could enable Indian goods to reach the European mainland 40% faster than via the Suez Canal maritime route.
• Strategic Investments: The success of the IMEC hinges on substantial investments in port and rail infrastructure, which will further anchor manufacturing value chains—a key strategic objective.

Geopolitical Implications

The IMEC's passage through Jordan and Israel carries significant geopolitical implications:

• Normalisation of Ties: The corridor's alignment through Jordan and Israel could support the Biden administration's efforts to solidify the recent normalization of relations between Israel and several Arab states, including the UAE. This normalization could potentially encourage Saudi Arabia to follow suit.
• Key Trade Hubs: Saudi Arabia and the UAE, both integral to the IMEC, aspire to establish themselves as crucial logistics and trade hubs bridging the East and West.

Challenges Ahead:

The IMEC presents a significant departure from the all-sea route currently used for trade between India and Europe via the Suez Canal. The increased handling of cargo, as it transitions from ships to rail, may raise handling costs, including terminal handling charges and container yard fees. Additionally, Egypt, the current operator of the Suez Canal, may raise objections to the IMEC plan due to potential revenue loss.

IMEC's Transformative Potential

IMEC holds immense potential to integrate India, West Asia, and Europe, catalyzing growth on an unprecedented scale. India's leadership can propel regional economies through technical expertise and an outward-looking approach. Collaborative efforts, stakeholder involvement, and financial support from institutions like the World Bank will ensure IMEC's success.

Conclusion

The India-Middle East-Europe Economic Corridor is a massive undertaking with far-reaching implications for global trade. While challenges remain, such as rail connectivity and technical standardization, the project holds the promise of enhancing economic ties among participating nations and reshaping trade routes. Its success will depend on meticulous planning, cooperation, and sustained efforts to overcome hurdles.

IMEC's success hinges on translating the memorandum of understanding into a comprehensive agreement. Experts from the railway sector, ports, shipping, and communications need to develop an action plan addressing physical and non-physical barriers, and financing, legal, and regulatory requirements. IMEC is just the beginning—an initiative that will stimulate regional and global cooperation for socio-economic development, realizing the concept of "Vasudhaiva Kutumbakam" on a grand scale.

Source - The Indian Express