On the sidelines of the G20 summit in New Delhi in September 2023, Indian Prime Minister Narendra Modi heralded the ushering in of a new economic trade belt, the India-Middle East-Europe Economic Corridor. India, the United States, Saudi Arabia, the United Arab Emirates, the European Union, Germany, France, and Italy signed a memorandum of understanding at the summit committing to support the project. Although not a party to the agreement, Israel was all along projected to be a significant indirect beneficiary. The corridor is envisioned as a maritime and rail trade route connecting India to the Middle East through countries including Saudi Arabia, Jordan, and Israel as well as to various parts of Europe. The project carries significant geopolitical implications: Built on India’s sustained effort to strengthen relations with Arab and European states, the corridor is supported by the United States as an alternative to China’s Belt and Road Initiative that will bolster regional integration. If completed, the over 3,000-mile trade corridor will include several rail lines and maritime shipping routes, allowing India to save millions of dollars on exports by using a more direct route. In addition, it was also meant to connect South Asia and the Middle East with Europe through Israel, cutting transportation costs for European states by around 40% and promoting peace between Israel and Arab countries. However, what was already a difficult task has become even more challenging in the wake of the Israel-Hamas war.
Gaza War Fallout
Despite the optimism expressed when the initiative was announced, geopolitical conditions changed with Hamas’ October 7, 2023 attack on Israel and Israel’s war on Hamas, with the Palestinian cause returning to the forefront of Middle Eastern politics. This is prompting questions regarding the involvement of many key players in the India-Middle East-Europe Economic Corridor. For example, Saudi Arabia halted discussions surrounding a normalization deal. Given Israeli Prime Minister Benjamin Netanyahu’s rejection of a Palestinian state, a normalization agreement seems unlikely, at least in the short term. Similarly, Jordan has also been sharply critical of Israel’s actions, and there have been frequent protests against Israel in Jordan. Given that Jordan was supposed to play a crucial role in transporting items to Israel, the Gaza war has created significant problems for its involvement. Among Arab participants in the corridor, only the UAE has taken any positive steps regarding the project since the war broke out, having signed an agreement related to the corridor with India in February, though no specific details were released.
Given that public opinion across the Middle East is currently strongly opposed to relations with Israel, it is likely Arab publics will be resistant to any attempts by their governments to participate in projects related to the India-Middle East-Europe Economic Corridor, a stance that may create hurdles for the initiative or slow progress. Israel’s disproportionate response following the October 7 Hamas attack brought the Palestinian issue back to the center of foreign policy decision making in the region, which has affected regional integration initiatives like the corridor by diverting attention. It is also likely that the conflict will make it much more difficult to coordinate aspects of the project even after the current fighting subsides.
Even outside of the context of the war, the corridor has faced challenges regarding implementation. For instance, executing infrastructure projects across the different countries involved will require significant standardization of laws and overcoming red tape in each country. Moreover, funding has been a major issue. Initial discussions on which countries and institutions would fund the initiative were quite vague, with the United States not committing any funding. Moreover, Europe, which is facing an array of economic challenges, is not positioned to bankroll expensive infrastructure projects.
This leaves space, predictably, for the richer Arab states, as well as India, to lead the way on financing the project. While they may have the resources to invest in the corridor, and Saudi Arabia previously committed to invest $20 billion, it remains to be seen whether they will. Similar multilateral projects have often fizzled out in the past despite being announced with much hype and optimism. One example is the Turkmenistan-Afghanistan-Pakistan-India Natural Gas Pipeline, which was first announced in 1995 and has been delayed for years.
If the deliberations over the corridor slow down further (especially if there is no cease-fire in Gaza or if the war’s aftermath proves too toxic in the short term), the Arab states will likely wait for the situation to improve before they invest in the project. Signs of a slowdown were already apparent when the project’s eight signatories failed to hold a meeting within 60 days of the launch of the corridor to develop an action plan, as called for in the initial announcement. Should such lapses continue, the project is likely to lose momentum and could eventually be derailed.
Such delays could also significantly impact the appetite of the major private investors and companies the project will rely on. Although Indian companies, such as Larson and Toubro, the GMR Group, and the Adani Group, were set to bid for projects related to the corridor, it must also make financial sense for them to begin investing. The other major source of potential financing for the corridor is the Partnership for Global Infrastructure and Investment, a G7 initiative announced in 2022 with a goal of raising $600 billion through public and private investments. This initiative was touted as having the potential to finance projects along the corridor, yet there has been no major news regarding its involvement since the corridor was announced, possibly due to regional instability.
Understanding the Outlook Going Forward
On February 1, Indian Finance Minister Nirmala Sitharaman said that India intends to continue work on the India-Middle East-Europe Economic Corridor and ensure it is completed. However, completion of the corridor will depend on a number of factors. First, Israel’s military actions in Gaza will likely continue to be a major impediment to progress.
Moreover, countrywide elections are being held in 2024 in key participating countries, including India and the United States. While it is largely expected that the Modi government will stay in power, it is not certain that President Joseph R. Biden Jr. will be reelected given questions regarding the loss of support from some voters enraged at his backing of Israel. Additionally, former President Donald J. Trump, who expressed isolationist tendencies previously as president, is rising in the polls. Thus, continued U.S. involvement in one of Biden’s signature initiatives is not guaranteed.
The India-Middle East-Europe Economic Corridor was initially conceptualized as India’s foothold in the Middle East and emblematic of its growing ambitions as a power broker globally. It was supported by both the United States and the European Union due to its potential to counter China. Yet the changing dynamics of the Middle East threaten to undermine the project. It is possible that even if the project does go forward, it will be delayed or scaled down. Political willpower, elections, and Middle East dynamics will play a large part in deciding the future of the project.
