IMEC could reshape Europe’s trade dynamics
The India-Middle East-Europe Economic Corridor marks a notable development in trade and diplomatic cooperation between the subcontinent, the Gulf and Europe.
In a nutshell
- IMEC may shift European political and economic power to the Southeast
- The corridor is a Eurasian alternative to China’s Belt and Road Initiative (BRI)
- Obstacles still need to be resolved before the project materializes
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In September 2023, India, Saudi Arabia, the European Union, United Arab Emirates and United States signed a memorandum of understanding with France, Italy and Germany to establish the “India-Middle East-Europe Economic Corridor” (IMEC) and build an economic system to link the Indian Ocean with Europe. IMEC is intended to connect the Arabian Sea to Jordan and Israel via a railway through the Arabian Peninsula. When completed, this corridor will likely include three major Mediterranean ports: Haifa in Israel, Piraeus in Greece and Trieste in Italy. If successful, IMEC may shift Europe’s economic power from the northwest to its southeast, changing the economic balance within the EU.
IMEC represents the revival of a dominant Eurasian trading route that thrived from antiquity to the 16th century. Documents such as the Periplus of the Erythraean Sea, written in Greek in the 1st century CE, attest to maritime trade between India and the Greco-Roman world. This sea and overland linkage functioned as part of the Silk Road until Portugal’s conquest of India, when Vasco da Gama became the first to sail from Europe directly to India by rounding Africa’s Cape of Good Hope.
Contemporary European factors favoring IMEC’s success include India’s economic growth and desire to expand trade with Europe, Emiratis and Saudis increasingly facilitating commerce, Italy’s northern industrial heartland, established rail and pipeline links from Italy and Greece to Central Europe, as well as less-recognized variables such as Greece’s maritime merchant fleet, which is currently the largest in the world.
Italy and Greece gaining European prominence
Under the government of Prime Minister Georgia Meloni, Italy has sought to differentiate itself as a leader in the EU. While growth rates are low, Italy’s economic expansion in recent years has mostly outpaced that of both France and Germany.
The IMEC features prominently in Rome’s shift in economic statecraft. Italy has recently appointed a special envoy to oversee the country’s inclusion in IMEC while stressing the corridor’s role in plans to reach an export growth value of 700 billion euros in the near term. Late last year, Prime Minister Meloni stated Rome’s goal of integrating Trieste into IMEC’s port system, emphasizing the importance of Italy’s nautical industry in the country’s economic future.
Italy has also backed its interest in IMEC with increased diplomatic ties with India and the Arab Gulf states. The UAE recently agreed to invest 40 billion euros in Italy. Despite France’s push to make Marseille the western terminus of IMEC, Italy’s infrastructure and closer proximity to the Middle East and India offer advantages.
Greece, while not an initial signatory, is seeking involvement in IMEC as the country positions itself as “India’s gateway into Europe.” In February, Greek Foreign Minister George Gerapetritis met with India’s External Minister S. Jaishankar to discuss bilateral investment. Greece’s prominence in shipping and its growing presence in the Eastern Mediterranean energy sector position Athens as a link between Italy and the Middle East, and therefore as advantageous to IMEC.
Since the corridor was announced, Greece has diplomatically emphasized IMEC in its relations both with India and Israel, the latter of which is also crucial to the corridor as almost all Indian shipments to Europe would pass through Haifa. Trade between Israel and Greece grew by 41.3 percent from 2023 to 2024, and the trend looks set to continue.
The geopolitics of IMEC’s resilience
So far, external geopolitical headwinds such as Israel’s war with Hamas in Gaza, Houthi attacks on Red Sea shipping, unrest in Syria, and tensions in Iran and Turkey have yet to halt progress on IMEC’s development. Trade between India and the UAE has increased by 93 percent since 2022, while the UAE devoted $2.3 billion to a railroad construction project linking it with Jordan. Saudi Arabia has similarly surpassed $4 billion in railway investments for rail projects related to IMEC as part of its “Saudi Vision 2030.”
IMEC was announced under the Biden administration in the U.S.; however, with Israel and Gulf states featuring prominently, it remains a centerpiece of American diplomacy during the second administration of President Donald Trump and builds upon the Abraham Accords that began during his first term in office.
Facts & figures
Connecting India and Europe via the Arabian Peninsula
Ties between Italy, the U.S. and India have flourished as the three countries have recently shifted domestically to conservative politics, and this translates into diplomatic relations as well. Italy’s involvement in IMEC coincided with Rome’s withdrawal from China’s Belt and Road Initiative (BRI), which it formally exited in December 2023, two months after IMEC was announced.
Of course, for IMEC to fully mature, the politics of the Arabian Sea will have to function with enough stability to offer Greece, Italy and other European countries the benefits of a trade link to India through the region. While the war in Gaza has strained Israel’s diplomatic relations, the Abraham Accords signed in 2020 have proven resilient through the conflict. The Trump administration sees Saudi Arabia joining the accords, and Riyadh’s inclusion is a focal point of the administration’s diplomatic efforts despite such a deal remaining elusive.
India’s importance
On the east side of IMEC, India’s economic growth lends additional weight to the plan’s survival. New Delhi has a strong interest in precluding encirclement by China’s BRI, and the Abraham Accords and IMEC offer New Delhi a complement to the Quadrilateral Security Dialogue (known as the Quad), its partnership with the U.S., Japan and Australia.
As countries worldwide de-risk from China, India’s potential both as an export-focused manufacturing base and as a consumer market is growing. Antonio Tajani, Italy’s foreign minister, was in New Delhi in April to bolster trade ties and promote IMEC. And as trade with the U.S. is now encumbered with tariffs, the EU and India aim to finally conclude a free trade agreement this year, after recently completing one with the Mercosur group of South American countries.
Read more on the EU’s trade strategies
- The future of U.S.-Europe trade
- China’s troubles and Europe’s response
- Implications of an EU-Mercosur trade deal
The European economies of the West Mediterranean may lose some influence from IMEC’s maturation. The French government under President Emmanuel Macron has made Paris’s involvement in IMEC a goal of his foreign policy agenda, working to secure France as the western end of the new economic trading system.
However, Greece and Italy aim for leadership roles due to geographic proximity and the right multilateral ties throughout the Eastern Mediterranean. EU politics today displays a different dynamic than during the 2008 financial crisis, when Italy and Greece were included among Europe’s weakest economies and derided for their high levels of debt and fiscal disorder.
Scenarios
Most likely: Italy, Greece and Cyprus grow in prominence as IMEC develops
Greece and Italy are better positioned to gain from IMEC than France and Germany for reasons of geography and elemental supply chain assets. Greece and Cyprus can leverage their proximity to the Suez Canal and the port of Haifa, two of the primary points linking Southeast Europe to India. Additionally, should Gaza redevelop following the current war with Israel under new leadership, Europe will benefit from the addition of a third port connecting the Mediterranean with overland railways to the Gulf.
Currently, Western European ports dominate European trade; however, Italy and Greece combined have four ports with significant possibilities of expansion. Piraeus, Genoa, Naples and Trieste are closer in proximity not only to emerging energy sources in the Southeast Mediterranean, but also to growing economies in the EU’s east, such as Poland, by rail.
Germany traditionally has been focused on trade with the North Atlantic, but is now looking at other markets. This gives Italy and Greece new leverage in European politics, which is compounded by Southeast European investment from the Gulf and trade with India. Rail infrastructure ensures Germany’s inclusion in IMEC’s growth, however, due to geography, infrastructure and supply chains, Southeast Europe’s leverage will likely grow as IMEC develops.
There is historical precedent for this: As German foreign policy from 1903 to the First World War, Berlin sought to establish a primary rail link with the Persian Gulf via the Berlin-Baghdad Railway to access energy and curtail British and Russian interests in Eurasia. Ironically, IMEC indicates a revival of this plan with Germany as the northwestern terminus of such a project, rather than its sole beneficiary.
Less likely: Germany and France remain Europe’s economic and political core
Germany and France have several factors in their favor to remain central to European policy and power, even if IMEC comes to full fruition. Both countries retain significant institutional power over decisions made in the European Commission and the European Parliament.
Economically, both France and Germany are included in IMEC’s development, both as a source of potential investment and as lucrative consumer markets for Indian products and services. Germany benefits from a more ambiguous stance on China’s BRI, unlike Italy’s withdrawal from it and its shift to IMEC. Bilateral investment between China and Germany decreased in 2023, and China’s prominence in the manufacture of electric vehicles and Beijing’s alliance with Russia place Berlin in an awkward geoeconomic position vis-a-vis Beijing that may strengthen Germany’s interest in IMEC.
Athens faces hurdles in that China’s Cosco is the majority shareholder in the Piraeus port operations in Greece; Athens is urging the Chinese to invest in the port to enable it to become an IMEC terminus. India also hopes that Greece’s relations with China will not impede the corridor’s progress.
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