On paper, IMEC has impressive backing, with the potential to boost regional and global trade, and help institutionalise peace. In reality, without strong investment and an early resolution to the Israeli-Hamas war, the initiative’s challenges may prove too much. 

The India-led G20 Summit in New Delhi in September set out a program for the the establishment of the India-Middle East-Europe Economic Corridor (IMEC). This ambitious initiative aims to bolster transportation and communication links between Europe and Asia.

Since the volatile Middle East will be the linchpin between Asia and Europe for this initiative, understanding regional IMEC implications, including its strategic impact on Egypt, is important. With many IMEC details remaining uncertain—especially the cost—the following analysis is preliminary. Additionally, the Israel-Hamas war has added further complexity to the initiative. While the war’s outcome is obviously unknown at the time of writing (late October 2023), it will nonetheless have immediate geopolitical implications for IMEC.

Currently, most trade between India and Europe is by maritime routes, transiting the Egyptian-controlled Suez Canal. Waterways are the cheapest and easiest way to transport large and bulk goods over long distances. The envisioned IMEC is comprised of a multi-modal transport corridor connecting India’s west coast with the UAE by sea, and a rail route crossing the Arabian Peninsula to the Israeli port of Haifa. From Haifa goods will be transported by sea again to Europe through the Greek port of Piraeus. Plans for the corridor also include pipelines for hydrogen produced in Saudi Arabia and the UAE, and telecommunication connections.

In entering this initiative, each country has its own strategic calculus. The US views IMEC through the lens of countering China’s growing presence in the Middle East as well as China’s massive infrastructure projects worldwide, through the Belt and Road Imitative (BRI). It also  seeks to keep Gulf Cooperation Council states close to the West and to counter several Indian commitments to major transit projects with Iran, like the International North-South Transport Corridor and development of the Iranian Chabahar Port. The US also desires to promote normalisation of relations between Saudi Arabia and Israel by integrating Israel into the initiative. Abu Dhabi and Saudi Arabia, furthermore, view this trade corridor as a means to strengthen their networks in Europe and diversify their non-oil economic models.

For Israel, this strategic endeavour aligns with the Abraham Accords, a series of agreements normalising relations between Israel and four Arab states. With respect to the bilateral Israel and India relationship, ties have flourished since Prime Minister Narendra Modi assumed office in 2014. The latest acquisition of the Haifa Port by the Indian Adani Group demonstrates that Haifa Port is also a key component of IMEC. Currently, Haifa Bayport is operated by the Shanghai International Port Group, which competes with the older Haifa Port, now run by Adani Group. This acquisition helps re-establish the Haifa port as a key Middle Eastern transport hub, and provides Israel with a unique opportunity to establish a trade route connecting the Mediterranean and the Gulf, bypassing the Suez Canal. The initial phase of this ambitious project involves operating the existing UAE-Saudi Arabia-Amman rail network, while constructing an additional 300 kilometers of rail track to connect Amman, Jordan with the port of Haifa. Although Israel and Jordan signed a peace treaty in 1994, the relationship remains fraught, which is not surprising given Jordan’s large Palestinian population. As an example, protests erupted in Jordan after it signed a deal to import Israeli gas in 2016.

If IMEC is implemented, ship transits through the Suez Canal will fall dramatically and Egypt would lose more than any other Middle Eastern country. Twelve percent of the world’s trade and seven percent of global oil shipments pass through the canal. Following its 2015 expansion, which included also the construction of a new 35-kilometre-long channel running parallel to the current one, the canal now enables passage of ships up to 23,000 Twenty-foot Equivalent Unit (TEU). In order to accommodate greater maritime traffic, and accommodate even larger ships, the canal Authority is currently examining further expansion and deepening of the canal. Highlighting its importance to Egypt, the Suez Canal generated a record annual revenue of US$9.4 billion in the 2023 fiscal year. It is also one of Egypt’s most important sources of hard currency. When (and a big if) IMEC is completed, canal revenues would decline dramatically, thereby weakening Egypt’s economy and undermining its security. The canal is also an important symbol of Egyptian national pride.

While Egypt was one of the special invitees to the G20 summit, it decided not to sign the IMEC MoU. Therefore, it was not surprising that in response to IMEC, the Suez Canal Presidential Advisor Admiral Mohab Mamish stated that “There is no alternative to the Suez Canal, because it is the fastest waterway for maritime transport,” remarking further that “the [IMEC] corridor is multimodal as it includes the transport of goods by sea, land and rail, in a very expensive operation that cannot be compared to the Suez Canal.”

Another important regional actor not included in the IMEC initiative is Turkiye. In response to its exclusion, President Recep Tayyip Erdoğan stated that “there can be no corridor without Turkey” and instead offered the construction of the Iraq Development Road, which aims to link Turkiye with the Iraqi port of Faw by road and railway.

In conclusion, the IMEC initiative encounters three main challenges: geopolitical, economic, and regulatory. It is presently a political declaration of intent that will not materialise in the short term. With regard to the economic challenge, the author is skeptical about the ability to achieve the project’s objective of cutting both transport time and expenses for goods travelling between India and Europe by an unrealistic 40 percent and 30 percent, respectively. Some economists and regional experts expressed their reservations on the feasibility—both politically and financially—of the initiative.

While the participants’ political commitments are clear for now, much depends on the priorities of the IMEC participants and the amount of resources they are willing/able to commit to this ambitious project. To date, only Saudi Arabia has committed to invest US$20 billion in the IMEC. Moreover, the need to formulate and adopt common standards as well as to implement regulations for diverse countries like Israel and Jordan would be difficult in the best of times.

Because of the crucial importance of the Suez Canal to Egypt’s economy, Egypt’s efforts to secure shipping should not be limited to the Suez Canal alone. The Red Sea faces many security threats, most notably from the Houthi control over parts of the Red Sea, which might directly affect the attractiveness of shipping through the Canal.

The Israeli-Hamas also has significant global security implications. Iran and its proxy Hezbollah are forcing Israel and the US to contend with the possibility that the war could expand into a wider regional conflict. Saudi Arabia immediately suspended normalisation talks with Israel. With this backdrop, and the mood of the Arab street, realisation of IMEC becomes even more challenging and will be used by Egypt to highlight the indispensability of the Suez Canal.

Shaul Chorev is the Director of the Haifa Maritime Policy & Strategy Research Center and professor emeritus at the University of Haifa in Israel. He is a retired rear admiral in the Israeli Navy and a former Head of the Israel Atomic Energy Commission.

This article is published under a Creative Commons License and may be republished with attribution.