On May 13, 2024, India and Iran inked a 10-year long-term bilateral contract for the operation of Chabahar Port, marking a significant milestone in regional connectivity. The deal was hailed as more than just a bridge linking India with Iran, but a critical economic route connecting India with Afghanistan and Central Asian countries.
Prior to this, the India-Middle East-Europe Corridor (IMEC) was signed on the sidelines of the G-20 summit in New Delhi on September 9, 2023. Designed under the Partnership for Global Infrastructure and Investment (PGII), the IMEC aims to stimulate economic development through enhanced connectivity and economic integration between Asia, the Arabian Gulf, and Europe.
The IMEC comprises two separate corridors: an east corridor connecting India to the Arabian Gulf and a northern corridor connecting the Arabian Gulf to Europe. It envisions a reliable and cost-effective cross-border ship-to-rail transit network for goods and services, as well as the laying of cables for electricity and digital connectivity, and a pipeline for clean hydrogen export.
The corridor aims to secure regional supply chains, increase trade accessibility, and improve trade facilitation across regions. Currently, much of the trade between India and Europe is through the Suez Canal, as there is no overland access due to Pakistan being located to India’s west overland. The IMEC will thus help overcome this obstacle and also cut down on the time, distance, and costs of transit of goods from India to Europe significantly. It is estimated that the time and cost of transporting goods to Europe from India will be reduced by 40% and 30%, respectively.
However, the Gaza war, which broke out on October 7, 2023, less than a month after the announcement of the IMEC, exposed some serious missing links in the corridor’s current structure. The conflict disrupted trade through the Red Sea and led to threats of closure of the Strait of Hormuz, highlighting the vulnerability of the corridor to regional conflicts.
The Houthis in Yemen have blocked the ships of Israel and its western allies from access to the Red Sea, forcing them to take the longer route across the Cape of Good Hope in South Africa, increasing shipping time and insurance costs. Additionally, Iran has repeatedly threatened to close the Strait of Hormuz, a critical waterway through which most crude oil and natural gas is shipped to other parts of the world, including India.
The disruption of trade through the Red Sea and the potential closure of the Strait of Hormuz pose significant challenges to the IMEC’s viability. To address these concerns, the inclusion of Oman to the east and Egypt to the west is vital. Oman’s ports open up into the Arabian Sea, well away from direct Iranian influence, and offer the closest and direct link to ports in India. Egypt, on the other hand, has good relations with all stakeholders in the region and can provide a safe and direct sea route to ports in Europe.
By incorporating Oman and Egypt into the IMEC, the corridor can be made safe from disruptions from future conflicts and can become a more robust and resilient channel for economic growth and stability. Building upon the wave of reconciliation within West Asia triggered by the Abraham Accords, the IMEC has the potential to be an ideal counter to China’s Belt and Road Initiative (BRI) and a useful tool to better integrate the region and insulate it from threats posed to connectivity due to conflict.
