IMEC, a Possibility Put on Hold

Introduction

India’s G20 presidency culminated in an ambitious transcontinental dream when New Delhi hosted the country’s first G20 summit in 2023. True to its theme, Vasudhaiva Kutumbakam or “One Earth One Family One Future”, the India-Middle East-Europe Economic Corridor (IMEC) is a key economic project involving seven countries – India, Saudi Arabia, United Arab Emirates (UAE), France, Germany, Italy and the US under a memorandum of understanding. Besides the signatories of the MoU, Jordan, Israel, and Greece play important roles in the project that aims to connect the Gulf to Europe.

IMEC seeks to create an efficient trade and transport network through an economic corridor divided into two separate segments: the eastern corridor connecting India to the Gulf via the sea route, and the northern corridor that will connect the Gulf to Europe.

The potential of IMEC though goes beyond investment in transportation infrastructure. It also plans to build underwater cables to facilitate data exchange, and hydrogen gas pipelines, which would contribute immensely to the energy sector in terms of exports and reducing greenhouse gas emissions.

It makes strategic sense as well. At present, the Suez Canal is the only route to Europe from the South Asian side, accounting for at least 15 per cent of the global shipping traffic, of which 30 per cent is container trade^[1]. The canal saw above 25,000 transits in 2023 alone^[2]. In this context, the ‘Ever Given’ incident stands out as a case in point. The Netherlands-bound container ship ran aground in the Suez Canal following a sandstorm in 2021, blocking one of the busiest trade routes in the world for six days. If something like that were to happen again, an alternate route through IMEC would ensure that the global supply chain remains intact.

However, the Suez Canal, arguably the shortest and most vital route between the east and west, is at present a chokepoint for international trade. IMEC would cut the transit times down by 40 per cent along with transportation costs by 30 per cent, making it the better alternative to the Suez Canal. Recent attacks on commercial ships in the Red Sea have adversely affected maritime trade transiting through the canal, the Bab El-Mandeb Strait near Yemen, and the Cape of Good Hope. Once operational, IMEC will offer a shorter and more secure transportation route, reducing heavy reliance on the Red Sea pathway. With sea freight projected to grow fourfold between 2010 and 2050^[3], IMEC will also prove to be critical in improving logistical efficiency.

For India, the success of this corridor is of immense importance. It acts as a strong counter to China's Belt and Road Initiative (BRI) project and will help reduce Chinese influence in the Southeast Asian and West Asian regions, establishing India as a key player in the international supply chains. Foreign policy analyst Dr. C. Raja Mohan underlines the importance of India’s ties with the Gulf states to foster regional connectivity and economic development in his article^[4]. It recommends a follow-up on India’s ‘Act West’ policy to establish stronger ties with European and Gulf nations. With China’s growing influence in the Middle East and North Africa (MENA) region as well, India will need to give its full attention to the IMEC project and its foreign policy.

The project hit its first roadblock just a month after the 2023 G20 meeting with the onset of the Israel-Hamas conflict. The Haifa Port in Israel plays a major role in IMEC, connecting Europe and West Asia, without which the project would not serve its fundamental purpose. Besides this, several other hurdles, such as financial constraints, are queering the pitch for IMEC. Notably, only Saudi Arabia has committed $20 billion towards this initiative. Then there is the issue of the non-binding nature of the agreements, which doesn't legally compel the signatories to contribute towards developing the project.

Recent geopolitical developments raise multiple questions about the success of the project. Can the IMEC break the deadlocks in the EU-India Free Trade Agreement negotiations, and can the corridor serve as a testing ground for India-EU collaboration in green technology and digital innovation? As the global political landscape continues to change, another challenge arises, the potential impact of Donald Trump's return to the U.S. presidency on the collaboration. Trump's policies and tendency to make unpredictable decisions will decide the future of the project.

IMEC and the Eu-India Free Trade Agreement

Free Trade Agreement (FTA) talks between EU-India were halted in 2013 due to multiple disagreements between the two parties over access to European products, differences in data protection rules, conflicting views on patents concerning medicines and the introduction of the EU's new carbon Tax–the Carbon Border Adjustment Mechanism (CBAM). Since then, both stakeholders have struggled to align their economic priorities, making it difficult to reach a consensus. While India seeks greater market access for its skilled labour, textile sector and agricultural products, the EU prioritises low tariffs on industrial and agricultural goods and automobile exports.

Regarding data protection regulations, India's stance on data localisation clashes with the EU's General Data Protection Regulation (GDPR). Similarly, disagreements on Intellectual Property Rights (IPR) contributed to the deadlock, India vouches for flexibility in IPR frameworks so that medicines are easily accessible, whereas the EU has stricter enforcement to protect its pharmaceutical and technology sectors.

EU is India's largest trading partner with trade reaching around €124 billion (Rs 11.16 lakh crore) in 2023^[5]. Negotiations concerning the FTA were resumed in 2021, however, after nine rounds over close to three years, the talks have faltered with India criticising the EU for setting irrational standards which limit the expansion of trade, hurting local businesses along the way^[6].

IMEC indeed holds immense potential to address these deadlocks. It can bridge the gaps through regulatory standardisation and trade promotion. The project's infrastructure and digital frameworks could help harmonise trade regulations between India and the EU. The need for the project's standardised systems concerning customs procedures, quality control and removal of tariff and non-tariff barriers (NTBs) will help facilitate trade and break the FTA deadlock between the two sides. IMEC's main strength lies in improving maritime and economic links between Asia, West Asia and Europe. Since the corridor will significantly reduce logistic costs and transit times, this improved connectivity would enhance trade volumes and lower tariffs on goods transported through this corridor. This could address India's demand for access and the EU's goal of cost-effective trade. This cooperation will also encourage small and medium enterprises to participate in this transregional trade.

Infrastructure development projects would facilitate investment flows between India and Europe. Building ports and logistics hubs could attract EU investment in Indian manufacturing and services sectors, which would further strengthen economic ties and pave the way for simpler FTA dialogues. The duo must adopt a more proactive and collaborative approach for IMEC to reach its full potential.

Setting up joint committees under the IMEC framework specifically for trade and regulatory issues could resolve the issue of NTBs and promote sector-specific cooperation. Encouraging private sector involvement in the project through public-private partnerships could accelerate infrastructure development and innovation, enhancing the India-EU relationship.

Enhancing trade connectivity, promoting regulatory standardisation, and fostering economic integration can create a new transregional economic bloc. Both stakeholders must leverage IMEC's framework to mend their differences and achieve mutual benefit. The ball was set in motion with the delegation-level meeting in January between India’s Commerce and Industry Minister Piyush Goyal and the EU Commissioner for Trade and Economic Security, Maros Sefcovic in Brussels. That both agreed to “fast track” FTA negotiations at an early date bodes well for the IMEC.

IMEC as a Catalyst for India-Eu Collaboration in Technology, Innovation, and Security

In an ever-evolving world, IMEC could be the answer to problems related to climate change, digital transformation, and cybersecurity threats. The economic corridor facilitates trade unification and serves as a platform for India and the EU to collaborate on initiatives in green technology, digital innovation, artificial intelligence, and quantum technology.

These partnerships would help form a single standard regulatory framework and the exchange of technologies could be a link between developing and developed countries. One of the main goals of the project is sustainable growth, and technology goes hand in hand with the goal of providing India and the EU with opportunities to explore joint initiatives.

Both stakeholders have existing renewable energy targets and technology transfer between the two shows their commitment towards the cause. While India currently produces 200 GW of renewable energy and has an electricity generation capacity of 452.69 GW, with an ambitious target of achieving 500 GW solely from renewable energy by 2030, the IMEC will help propel India towards its goal much faster^[7].

The corridor plans to build hydrogen pipelines along the route from India to Europe, which would play a key role in the green energy sector and accelerate the advancements in hydrogen production and transportation. These hydrogen supply chains would help reduce transportation costs, standardise production methods, and make green hydrogen a viable energy alternative to fossil fuels and coal. Setting up hydrogen production hubs in the Middle East, using EU technology and Indian cost-effective labour and expertise, could pave the way for its commercial adoption.

The International Energy Agency, in its 2021 Global Hydrogen Review, predicts hydrogen demand to go up six-fold by 2050^[8], and IMEC is a train that should not be missed by a rising superpower like India. Since the region is also gifted with ample sunlight, the vast empty deserts can serve as the ideal location to create solar-powered hydrogen production plants in later phases of the project^[9].

As one of the most revolutionising technologies of this century, the application of Artificial Intelligence (AI) will prove useful in the IMEC project. AI-powered supply chain solutions will support enhanced trade and transport connectivity. It can play a major role in many ways, such as keeping transport systems under check and predicting maintenance needs using sensors embedded in railway tracks and port machinery to reduce repair costs drastically. AI can also analyse real-time data on weather conditions, port conditions and traffic, and use this data to provide the best possible shipping route. This would lower the possibility of disruptions and reduce fuel consumption, lowering greenhouse gas emissions and ensuring timely deliveries. Ports and warehouses can use AI tools to keep a check on their inventories and use it to analyse demand patterns to avoid overstocking or shortages, ensuring efficiency in trading. Since AI will become important to the corridor's operations, naturally standardised ethics and governance frameworks must be set up. Both India and the EU, with their opposing approaches to AI and internet frameworks, will have to come together to improve IMEC.

Quantum technology is another area which is making rapid advancements in the domains of cybersecurity and communication. IMEC can act as a platform for India and the EU to explore the potential of quantum technology in advanced connectivity and infrastructure. Since the corridor spans three areas with contrasting geography, IMEC is the perfect testing ground to collect data for quantum technology innovations to optimise logistics and data exchange and establish a secure method for data transfer.

Interconnected systems spanning maritime, railway, and digital networks require strong encryption to secure sensitive data. The Blue-Raman subsea cable connecting India with Saudi Arabia, Oman, Jordan with Italy, Greece, and Israel is expected to launch in 2025. Creating a quantum-safe corridor for the subsea cable will ensure a more secure data exchange method and resilience against cyberattacks. The EU has already committed over €400 million, through the Horizon Europe programme, towards research in quantum computing, simulation, communication, and quantum sensing and metrology^[10]. India also recently announced a ₹6003.65 crore allocation for its National Quantum Mission, an eight-year plan towards scientific and industrial R&D of Quantum Technology^[11]. The EU’s expertise and capital combined with India’s potential to provide a skilled workforce in this domain will speed up development in quantum technology to equip IMEC with the latest technology systems.

Beyond securing data transfer, and driving software innovations, quantum technology also offers application in infrastructure projects in IMEC. Quantum sensors provide precise measurements and detect any changes in physical infrastructure. The economic corridor involves a complex network of railways, ports and pipelines, all subject to faults, and wear and tear. A solution could be quantum sensors that can detect pressure, temperature, and structural integrity changes to ensure timely repair and maintenance. The energy sector, especially the renewable energy category, can benefit immensely from the use of sensors. It can be used to optimize energy efficiency and allow real-time monitoring of hydrogen transportation to prevent leaks. This novel innovation will help give IMEC a competitive edge in global trade.

Implications of Trump’s Return to Presidency

The success of the corridor relies on the US delivering on its promise of cooperation. The change of guard at the top will influence the way forward for IMEC to a large extent. How will the new US government under the leadership of Donald Trump view the multilateral pact? Trump’s America First policy with a stress on bilateral rather than multinational engagements could set the tone. If the flurry of the first few executive orders and decisions is anything to go by, the coming days would be decisive for the future of the IMEC. It is in the interest of the US to support the IMEC as it acts as a counterbalance to China’s BRI and aligns with Trump’s efforts to limit Chinese influence in the West Asian region.

Since the US still imports around 12 percent or so of its petroleum products and crude oil importer from the Gulf states, it could act as a key developing partner in the corridor’s infrastructure and logistics networks, and establish an American presence in the region. To further advance the “America First” doctrine, Trump could push for a more transactional mindset than engage in IMEC’s global integration goal. He might seek an increase in the role of the US in building infrastructure projects, energy alliances, and digital connectivity to benefit US businesses and workers involved in the project. The erstwhile US ambassador to India Eric Garcetti in an interview in second week of January talked of how crucial the IMEC is to the US and urged India to share the American vision of a smaller role for state actors in building the project’s infrastructure and involvement of private companies in the project.

Looking at past trends, Trump might want to strengthen bilateral ties with India and help it hold a more important role in IMEC. Making infrastructure and trade plans that match Beijing’s influence in the Middle East region, should be one of the priorities of the Trump administration. China has invested $20.88 billion in the Gulf region since 2013^[12], the second largest recipient, also securing the top position in receiving Chinese construction engagement.

China has been increasing its activity in the Middle East over the years, with higher trade volumes and investments in 2024, deepening diplomatic ties through energy partnerships, and hosting summits addressing economic development and technology transfer agreements between the two regions.

In a world that aspires to be multipolar, China is reluctant to adopt the idea as it expands its presence all over the world. It also challenges the US’ pole position in the global arena resulting in the US-China great power rivalry. Partnering up with key allies such as Saudi Arabia and UAE through the IMEC will provide the US with a better foothold to counter China’s dominance in infrastructure and investment projects in the Gulf.

Trump’s stance on the Panama Canal lends weight to the likelihood of his administration putting its weight behind the IMEC. Supporting the project would re-establish US presence in the Arab region while countering Chinese influence. Most importantly, it gives the US room to influence terms of a new transregional trade corridor along with other stakeholders. However, it is difficult to predict what Trump has in mind for the future of the project. An inconsistent US foreign policy might serve as an obstacle to the project’s collaborative nature. IMEC presents the Trump administration with an opportunity to dominate a key trade and infrastructure network.

Conclusion

The project can only start if all the stakeholders guarantee their commitment, with the US playing a critical role in the process. The project will be more than just an economic corridor as it incorporates the establishment of hydrogen pipelines and high-speed fibre optic undersea cables along the route. The advancements in trade negotiations between India and Europe, combined with closer India-US ties following Trump’s second inauguration in the White House bodes a bright future for IMEC in 2025.

In addition to that, the recent ceasefire deal between Israel and Hamas is a sign towards ending the conflict. This development benefits IMEC, as Israel, which plays a key role in connecting Europe with South Asia, can restore operations to its full potential with this hope of stability in the region. Given adequate support, the project can navigate its way in this ever-changing world, with the potential to redefine global trade, cooperation, security and technology, boosting India’s rise as a regional superpower.

End Notes

^[1] Reuters. “Suez Disruption: A New Inflation Risk on the Horizon.” Reuters, December 19, 2023. https://www.reuters.com/world/middle-east/suez-disruption-new-inflation-risk-horizon-2023-12-19/ [3].
^[2] Port Economics, Management and Policy. “Tonnage and Number of Transits, Suez Canal, 1976-2023.” Port Economics, Management and Policy A comprehensive analysis of the port industry, at https://porteconomicsmanagement.org/pemp/contents/part1/interoceanic-passages/tonnage-number-transits-suez-canal/ [4] (Accessed January 20, 2025).
^[3] ITF Quantitative Policy Analysis and Foresight Division. “ITF Transport Outlook 2019.” Https://Www.Oecd.Org/En/Publications/Itf-Transport-Outlook-2019_transp_outlook-En-2019-En/Full-Report/Component-2.Html#acknowledgement-D1e172 [5], OECD, May 22, 2019, pp.37.
^[4] Mohan, C. R. (2024, December 6). India and Europe: The Rise of the Indo-Mediterranean. NUS | Institute of South Asian Studies. https://www.isas.nus.edu.sg/papers/india-and-europe-the-rise-of-the-indo-mediterranean/ [6].
^[5] “EU Trade Relations with India.” European Commission. Accessed January 23, 2025. https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/india_en [7].
^[6]Reuters. “India’s Trade Minister Says ‘irrational’ EU Standards, Unfair Rules Hurt Ties.” Reuters, October 11, 2024. https://www.reuters.com/world/india/indias-trade-minister-says-irrational-eu-standards-unfair-rules-hurt-ties-2024-10-11/ [8]. (Accessed January 20,2025).
^[7]PIB Delhi. “India’s Renewable Energy Capacity Hits New Milestone.” Press Information Bureau, November 13, 2024. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2073038 [9].
^[8]International Energy Agency. “Global Hydrogen Review 2021.” IEA, November 2021. https://iea.blob.core.windows.net/assets/5bd46d7b-906a-4429-abda-e9c507a62341/GlobalHydrogenReview2021.pdf [10].
^[9]Patel, Prachi. “Solar-to-Hydrogen Pilot Plant Reaches Kilowatt Scale.” IEEE Spectrum, April 10, 2023. https://spectrum.ieee.org/solar-to-hydrogen [11].
^[10] “Quantum Technologies Flagship.” European Commission, 2023. https://digital-strategy.ec.europa.eu/en/policies/quantum-technologies-flagship [12].
^[11] Press Information Bureau Delhi. “Department of Science and Technology Year End Review 2024.” Press Information Bureau, December 24, 2024.
^[12] https://pib.gov.in/PressReleseDetailm.aspx?PRID=2087506&reg=3&lang=1 [13].

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