Chronicle of the Middle East and North Africa

India – Middle East – Europe Economic Corridor: Pros and Cons

The successful realization of India - Middle East - Europe economic corridor hinges on the completion of the Saudi-Israeli normalization process.

India - Middle East - Europe
India’s Prime Minister Narendra Modi (3L) and his Saudi Arabian counterpart and Crown Prince Mohammed bin Salman (R) shake hands. Money SHARMA / AFP

Ali Noureddine

This article was translated from Arabic to English

In September 2022, during the G20 summit, the United States took the lead in sponsoring the signing of the Economic Corridor Agreement. This pact aims to establish a strategic link between India and European Union countries, facilitated by the United Arab Emirates, Saudi Arabia, Jordan and Israel.

The significance of this project was underscored by the presence of key leaders, including U.S. President Joe Biden, Saudi Crown Prince Mohammed bin Salman, UAE President Mohammed bin Zayed Al Nahyan, Indian Prime Minister Narendra Modi, and European Commission President Ursula von der Leyen during the signing of the agreement. Their presence, alongside several European leaders, emphasized the gravity of the agreement and the substantial economic and political commitment of the involved parties.

Numerous analyses suggest that the economic corridor project has the potential to reshape regional trade dynamics in line with the interests of the participating parties. It is evident that all signatories, including the U.S. and the EU, have pre-existing geopolitical and economic motives that drive their support for such a project. This raises the question of the potential transformations in the regional landscape if the project proves successful in the long run.

However, there is apprehension among various regional actors, such as Egypt, Iraq, Iran and Turkiye, about the future implications of the project. All of these countries have regional interests and projects that could be in competition with the outcomes of the economic corridor project. Notably, China stands out as the party most impacted by this initiative due to its significant economic interests and ambitions in the Middle East region.

Details of the Economic Corridor Project

Before delving into the interests and stances of the regional parties involved, it’s important to emphasize that this project extends beyond constructing infrastructure solely for the transportation of commercial goods. It encompasses building the necessary infrastructure for transmitting energy sources, electricity and digital data, granting the economic corridor strategic significance in light of energy supply conflicts and information transmission networks.

Consequently, the corridor aims to reduce trade costs among the participating countries by an impressive 40 percent, positioning it as a formidable competitor to existing trade routes.

In terms of commercial goods transportation, the project will establish a linkage between India’s ports and those of the UAE. Subsequently, it will connect the UAE to Israel via a railway traversing the territories of Saudi Arabia and Jordan, with goods being shipped from Israeli ports to Europe by sea.

Along this trade route, the project will capitalize on expansive storage and transshipment facilities in the UAE and Saudi Arabia, enhancing its efficiency. Moreover, trade agreements designed to open markets and to facilitate transit through these countries will further benefit the project.

Regarding the transfer of energy, electricity and digital data sources, the project’s objective is to interconnect the signatory nations through hydrogen pipelines, initially leveraging them for natural gas transportation. Furthermore, the railway route between the UAE and Israel, along with the remaining corridor underwater sections, will host electricity transmission and digital communication cables.

The interests of the signatory parties to the agreement

Each signatory party to the project agreement has distinct interests that can be realized through this economic corridor. In the initial phase of marketing the project under the Biden administration, the corridor’s strategic significance lies in circumventing China’s Silk Road initiative in the Middle East region, aiming to connect China commercially with Europe through alternate pathways.

The United States views this project as a means to mitigate the impact of Chinese investments in the region, particularly those concentrated on Silk Road-linked infrastructure projects. Additionally, for the Biden administration, the project holds the potential to bolster India’s position as a burgeoning industrial and exporting hub in South Asia, positioning India in opposition to similar Chinese interests.

Simultaneously, the project is expected to expedite the normalization process between Saudi Arabia and Israel, a goal the United States has pursued for some time, fostering investments and economic interests to bring the two countries together in the long run.

European Union countries, being the ultimate destination along the economic corridor, perceive it as an avenue to secure stable, cost-effective imports of energy resources. This is especially vital given their recent struggles in compensating for interruptions in Russian gas supplies. The new corridor is anticipated to enhance European countries’ reliance on Indian goods, reducing their dependence on Chinese imports in the long term, aligning with the European Union’s objectives.

On another note, the project’s announcement by Israeli Prime Minister Benjamin Netanyahu serves as a notable political achievement within Israel, especially as it increases the country’s economic integration with its Arab neighbors, all while maintaining a status quo regarding the Palestinian-Israeli conflict. Moreover, the project affirms the views of the extreme Israeli right led by Netanyahu, emphasizing the need to minimize gains to Palestinians in the West Bank and Gaza Strip to advance the peace process with Israel’s Arab neighbors.

In the Arab Gulf states, both the Saudi and UAE regimes celebrated this initiative, recognizing its significance in establishing a crucial economic corridor linking South Asian and European countries. This achievement comes in the context of recent invitations extended to the UAE and Saudi Arabia to join the BRICS group, reflecting their commitment to maintaining balanced and pragmatic relations between the West, China, and Russia.

Lastly, the signing of the agreement marked a historic milestone for Indian Prime Minister Narendra Modi, particularly in the lead-up to the Indian general elections slated for 2024. This project allows India to benefit from an extensive infrastructure investment network to export Indian goods to Europe and import energy resources from the Arab Gulf countries.

Additionally, India will emerge as a key destination for other South Asian nations seeking to export their goods to the European market, thus diverting them from the Chinese Silk Road corridors. These developments will significantly increase India’s competitiveness against China’s attempts to assume similar roles.

Regional parties’ concerns

Given all the reasons mentioned, it is evident that China is the international stakeholder most impacted by this project. However, the project has also sparked concerns among several regional parties, which are cautious about how the corridor might affect their economic and political interests.

For instance, following the project’s announcement, Egypt saw a surge of inquiries regarding its potential impact on commercial traffic in the Suez Canal – the vital route currently facilitating trade between South Asia and Europe. The canal administration responded firmly, refuting exaggerated expectations regarding the economic corridor’s influence on the Suez Canal’s role. Nonetheless, they acknowledged the possibility of the corridor affecting the volume of commercial traffic through the canal and the resulting impact on Egypt’s canal revenues.

Regarding Turkiye, the new project poses a challenge to the aspirations of President Recep Tayyip Erdogan, who is aiming to position his country as a regional hub for re-exporting Eastern Mediterranean gas to Europe. The economic corridor directly linking Israel’s energy supplies to the European market without passing through Turkiye has Erdogan concerned.

From Iran’s perspective, the new corridor presents multifaceted challenges. On one hand, it enhances economic ties between Israel and its Arab neighbors, potentially leading to reduced Iranian influence due to political rapprochement. On the other hand, the corridor diminishes Iran’s role as a geographical mediator between India and the Middle East and Europe. It’s worth noting Iran’s significant investment in infrastructure projects over the years to economically leverage its geographical location and transform into a crucial trade corridor in the region.

Lastly, Iraq emerges as a regional stakeholder impacted by this project, albeit to a lesser degree. Iraq is presently pursuing a special initiative, the “Development Road,” seeking to position the country as a regional transportation hub linking the Arab Gulf states with Turkey and Europe. However, the new economic corridor project connects the Arab Gulf states to Europe through Israel, bypassing Iraqi territory and conflicting with Sudanese plans.

In any case, it is premature to definitively assess the success prospects of the project, given the substantial investments required for the essential infrastructure for goods and energy transport. Additionally, the successful realization of the project hinges on the completion of the Saudi-Israeli normalization process before direct agreements can be signed between the involved parties.

Ultimately, the project’s success will be contingent on private sector companies’ willingness to make substantial investments in the economic corridor, a factor that remains uncertain at this juncture.

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