New Trade Initiative Offers India Major Gains in Middle East

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New Delhi’s bid to expand its economic and diplomatic clout beyond Asia received a major boost with the announcement at this month’s G20 summit of ambitious plans to develop a new trade route running from India through the Middle East to Europe.

The so-called India-Middle East-Europe Economic Corridor, or IMEC, is backed by the United States and is widely seen as a challenge to China’s Belt and Road Initiative, which has already developed major infrastructure projects in some of the same countries.

But the proposal, involving a network of new shipping and rail lines, stands to shake up the existing order in other ways as well, not least by establishing new direct trade routes between Israel, Saudi Arabia and the Persian Gulf.

For India, analysts say, the program offers a capstone to a yearslong effort by Prime Minister Narendra Modi to boost trade and forge ties with the Gulf states, the source of much of its oil and gas, and home to a large Indian diaspora.

This “concerted effort has gained momentum over the past several years,” said John Calabrese, a senior fellow at the Washington-based Middle East Institute.

“India’s vigorous efforts to strengthen economic cooperation with the Middle East have been met with open arms and reciprocation,” Calabrese added in an interview. “The Gulf states, in particular, view India as a rising power with great market and human capital potential.”

Trade already growing

Trade between India and the Arab world has seen sustained growth, already surpassing $240 billion a year. Bilateral trade between India and the United Arab Emirates alone amounted to $84 billion as of the end of March 2023, while trade with Saudi Arabia topped $53 billion. The region supplies approximately 60% of India’s total crude oil imports.

Calabrese sees the IMEC project as having strategic as well as economic value for India, carrying its strategic rivalry with China into new territory while offering countries in the Middle East an alternative to relying on China or the United States.

“India’s importance to the Gulf countries has risen as they chart a course for diversifying and balancing their relations with the world’s major powers,” he said.

Michael Kugelman, director of the South Asia Institute at the Wilson Center in Washington, agreed that India can make significant diplomatic gains if it can navigate the hurdles posed in the Middle East by regional conflicts, historical animosities and competition from other global powers.

India has already strengthened its ties with some of the most significant players in the region, from Egypt and Saudi Arabia to Israel, he told VOA.

“What’s also notable is that while India’s relations with Saudi Arabia and Israel have really taken off, New Delhi’s ties with their respective longstanding rivals, Iran and the Palestinians, have not become fraught, even though they’ve become less robust,” he said.

‘Nothing short of historic’

India can also expect to establish closer links in Europe, where officials are enthusiastic about IMEC, which would establish new shipping routes between India and the United Arab Emirates, alongside a freight rail system traversing the Emirates, Saudi Arabia, Jordan and Israel. From there, goods could be transported to European countries.

European Commission President Ursula von der Leyen hailed the venture as “nothing short of historic,” emphasizing that it would slash transit time between India and Europe by 40%. She underlined that IMEC represents the most direct link thus far connecting India, the Gulf and Europe.

Saudi Arabia’s Investment Minister Khalid Al-Falih went further in his endorsement, likening IMEC to the “Silk Route and Spice Road.” The initiative is projected to incorporate essential infrastructure elements such as electricity cables and pipelines for clean hydrogen.

“The goal is, of course, to strengthen India’s economy by facilitating more trade in more markets,” Kugelman said. “But also about deepening important partnerships and scaling up Indian investment in a region that New Delhi views as highly strategic — because of its location, its large Indian diaspora and high energy trade with India.”

Kugelman sees the initiative as a natural extension of the growing strategic relationship between the United States and India, marked by new alliances, including the Quad, which also draws in Japan and Australia.

“Their interests in the [Middle East] align, in terms of support for connectivity and commercial projects. And so, India’s engagement there allows the U.S. and India to cooperate in a region outside the Indo-Pacific,” he said. “I do think that India’s deepening footprint in the Middle East will introduce a new phase of great power competition.”

Meanwhile, the Middle East could become a new battleground for India-China competition, Kugelman said.

“Beijing has become a bigger player in the region in recent years, as seen by its strategic agreement with Iran and its brokering of the Iran-Saudi Arabia rapprochement deal,” he said. “India, working with the U.S. and its European partners, will want to push back against all that.”

Source : VOA News