The historic agreement on the “India-Middle East-Europe Corridor (IMEC)” during the G-20 Summit in Delhi marks a momentous occasion for India. The corridor not only provides an alternative transport route to the thriving markets of the Middle-East and Europe but also extends India’s reach to North Africa and North America.

The strong support and enthusiasm demonstrated by the top leadership of the eight participating countries during the signing ceremony bode well for India and the entire Eurasian 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, respectively, and vice versa. Member-states are optimistic that it will enhance logistical efficiencies, lower business costs, promote economic unity, create jobs, and reduce greenhouse gas emissions, fostering transformative integration across Asia, Europe, and the Middle East.

The IMEC comprises two distinct routes; the East Corridor connecting India to the Middle-East and the Northern Corridor connecting the Middle-East to Europe. This extensive network integrates a railway corridor, a hydrogen pipeline, and high-density optical fibre cables.

Once completed, it will establish a dependable and cost-effective ship-to-rail transit system for cross-border movement of goods and services. It complements existing maritime and rail-road transport routes, such as the Suez Canal, North South Transport Corridor, and China’s Silk Routes, facilitating seamless transit between India, the UAE, Saudi Arabia, Jordan, Israel, and Europe. Indian Railways with its proven expertise in building the railway networks in deserts, is likely to get a major share of contracts in this proposed corridor.

Geostrategic Churning

The expected cost of the proposed corridor will be $20 billion on laying a dedicated rail network, contiguously supported by state of art optical fibre network and a hydrogen pipeline. Initially, the existing UAE-Saudi-Amman rail network with construction of additional 300 km of network connecting Amman with port Haifa, Israel will be operationalised. As the UAE foresee rich business dividends from this project, it is willing to finance the remaining stretch of 300 km on a priority basis. The network will support the seamless movement of goods under a digital and single trade document, harmonised transport rules and will be far cheaper operationally than the Suez Canal route, considering its high charges for vessel towing, tug-boat services, pilotage,transit fee etc.

Additionally, the IMEC envisions the development of three industrial corridors namely food, green energy and knowledge economy. The commitment of participating countries is reflected in their joint pledge of committing themselves to a diligent formulation of an action plan for sources of funding, network route and alignments, design and layout and allocation of work among participating countries within next 60 days from date of signing of MOU.

Dedicated cable networks will establish a solar energy grid, information and digital connectivity, unleashing a window of opportunities to Indians in the IT sector and Knowledge economy of the Middle-East and Europe. It underscores the collaboration between India and Israel in the knowledge and innovation sector, creating a knowledge corridor for Industry 4.0. IMEC proposed a dedicated hydrogen pipeline along with tapping the other sources of renewable energy such as solar and wind to reinforce the region’s energy security.

Geostrategic Churning

This project enjoys robust support from all member states, particularly from the US and the European Union, who view it as an avenue to access India’s expanding consumer market and counterbalance China’s increasing influence in the region. The US has multifaceted objectives, including steering India away from the influence of Russia and Iran, especially in light of the challenged ‘North-South Transport Corridor’.

The US seeks to maintain its regional presence as a stabilising force by involving Saudi Arabia, the UAE, Israel, and other Gulf nations. This strategic move aligns with the ‘Abraham Accords’; and the other broader initiative, i.e. I2U2 (India, Israel, US and UAE).

For India, the project holds economic promise through its large diaspora in the Middle-East, contributing to energy security and serving as a market for Indian goods. It positions India strategically, fostering influence over the Indian Ocean and expanding reach into Mediterranean, Atlantic regions.

India’s expectations

For this ambitious corridor, funding sources remain uncertain but are expected to come from the ‘Build-Back-Better World (B3W)’ initiative and member-states’ infrastructure investments. The US-led B3W initiative aims to attract private sector investments, potentially differing from China’s Belt and Road Initiative (BRI), which offers a mix of loans, grants, and financial tools.

The extended planning phase of infrastructure projects, combined with high private investor expectations, can inflate costs and undermine financial feasibility. Hence, ensuring consistent funding for B3W projects presents challenges, as recipient nations may face uncertainties in securing commitments from international donors or private investors. The resultant delays in fund allocation can lead to project delays, cost overruns, and reduced viability.

Moreover, sustaining revenue sources (i.e. tolls and user fees) to repay loans or attract private investments becomes challenging.

Accordingly, India should advocate for a mix of public and private financing, recognising that some projects, due to their long development periods, may not be financially viable without public subsidies or grants.

India should also consider a proposal of laying a dedicated gas pipeline from the Middle-East to India to support the needs of its household consumption as natural gas is far more affordable for common Indians considering the available infrastructure and switch-over cost to use of hydrogen.

India must remain committed and engaged with other transport and energy corridors; NSTC, Suez Canal, Arctic Route via Vladivostok. We must continue to remain neutral but vigilant in evolving geo-politics keeping our national interests.

The writer Professor at IIFT, New Delhi. Views expressed are personal