The IMEC vs BRI: Taking the cue

With world global politics and order is witnessing rapid changes and competition,  development or emergence of any group, bloc or initiative is bound to cause some turbulence for few nation. As China’s BRI and its various initiative since 2013 has pushed the West on the feet to compete and regain its global dominance, the development of Middle East-Europe Economic Corridor (IMEC) alarmed China and BRI 2.0 is one such an example of China’s cautious move to ensure the road to its rise to be a developed nation by 2049 – Chinese Dream – is smooth. The IMEC has given the West and India, the UAE and Saudi Arabia ample opportunities to derive benefits from growing alignment of interests while ensuring rivalry with China don’t go beyond control.

What is China’s Belt and Road Initiative?

As 2023 marked the 10^th anniversary of the China’s much fanfare infrastructure project the Belt and Road Initiative (BRI) – sometime referred as the New Silk Road – it’s time to re-look the initiative again to understand the theme and aspect of the paper. Over the years, as the BRI was able to expand its scope and attractiveness, it provided China ample opportunities to increase its global power and reach which compel the US to align with like-minder nations. China argues the BRI is a win-win situation for all the countries partnered with the initiative as it increased a sense of fulfilment in such nations. Despite, the BRI received or largely being labelled as part of China’s debt trap policy, countries interest and inclinations to such an initiative continues to grow and increased.

To explain such point, since its inception, China’s trade in food products with the BRI nations has increased by 162% reflect it continues to be a platform nation worldwide look to address their domestic economic issues and concerns. China has signed over 200 cooperation agreements with 152 nations and 32 international organisation under the BRI platform in June 2023 reflects, the continued dominance of the initiative. With BRI continues to expand China’s influence, many analysts have argued the projects built under the BRI have caused disturbance and economic unease. However, on the other, the West and US continue to struggled to offer a competing project or vision despite growing opposition in many BRI partnered nations to BRI.

A response to China’s BRI

With Win-Win formula remains the core of the BRI, since its inception the response to the BRI has been conducive for China to expand its engagement with other nations without reflecting the initiative imposing its policy on others. As the West and many political pandits contradict such an image of the BRI, and thus with like-minded countries establish the CPTPP in 2018, I2U2 group in 2021, EU’s Global Gateway in 2021 and G7’s PGII in 2022 as means to counter the BRI. However, absence of interconnectivity between such groups, initiative and partnership and low financial assistance and support, such acts have failed to impact the might, reach and popularity of the BRI. China under the initiative have invested around US$ 1 trillion till March 2021, focusing on the large, strategic and critical projects which has only expanded and further assisted many nations and BRI partner countries at time of bail out.

               However, such a fairy-tale of BRI has a dark and gloomy side, as China’s low economic growth and domestic economic woes has impacted its outreach under the BRI which has only impacted the initiative, impacting China’s global image. To understand it better, China’s bail-out as imagined hasn’t come cheap for many BRI partner nations like Sri Lanka, Pakistan and Argentina, as China’s People’s Bank of China charged 5% interest rate against 2% of the IMF for the rescue loans. Considering billions of dollars invested in low and middle income nations in Asia, Africa and Europe, such bailouts have proved costly for China, as Chinese government invested US$ 240 billion between 2008 and 2021 to bail out 22 countries. Although, the amount spent by China to bail out other nations are still less than the amounts spent by the US and IMF over the years. The Chinese financial assistance and bail out has continue to alarmed many BRI partner countries of the debt-trap, with such bailouts continues to pile up, it has cause a worry for China as it could result in a ripple effect, as it pushed nations like Italy to exit the BRI.

China is pushing BRI 2.0

Growing US-China geopolitical rivalry and the criticism the BRI received, Chinese President Xi Jinping during 2^nd Belt and Road Forum held on 26^th April 2019 in Beijing, unravelled the BRI 2.0 highlighting China has taken the BRI’s critique seriously. Such development reflects China seem to understood the relevance of the need for the long term success of the BRI related projects which will yield for both Chinese companies and the nation where they’re situated. With BRI 2.0 becoming more transparent, ensuring open market and focus on quality to benefit all partner nations, it not only address the financing and debt issues, but ensure all BRI-related projects are more environment friendly.

As a result, China diversify its investment and the size of project to ensure they remain protected from the ongoing geo-strategic rivalry between the US and China which pushed the European Union and many Middle East nations in a difficult situation. To understand it better, for China, the most attractive sector for investment in Europe are fintech, artificial intelligence, cleantech, gaming, ecommerce and biotech and focusses to invest more in smaller companies. Such a situation became concerning for many European countries with China’s large strategic investment with the UK, Germany, Netherland and France being a top recipient has left Europe divided and looking for a way out. With the BRI becoming overarching foreign policy of China, tweak like the BRI 2.0 and a growing strategic ties between Russia and China will allow China to expand BRI’s network. BRI interlocking with the International North South Transportation Corridor will expanded the BRI’s geo-economic strength and reach, but also improved China’s relationship with Russia and Iran.

Italiexit, the G-20 and launch of the India-Middle East-Europe Economic Corridor

As the recently concluded G20 summit is viewed as of a great relevance for India, the summit also witness the Chinese President Xi Jinping and Russian President Putin skip the summit. It highlights G20 isn’t a priority, as they intent to increase the bilateral trade to US$200 in 2024, expand BRICS and meet one another during the 3^rd Belt and Road Forum which will held in Beijing in October, 2023. With 2023 G20 Summit was a great success, among many events, two events Italy’s exit (Italiexit) from the BRI and the launch of India-Middle East Economic Corridor are viewed as directed against China and the BRI.

Italy who made a headline in 2019 – a G7 member – join China’s BRI is now planning for a soft or planned exit from BRI. Such Italy’s stand against BRI reflects growing domestic economic strain and issue like the debt trap forced the Meloni’s government to inform Chinese Prime Minister Li Keqiang about its decision concerning the BRI during the 2023 G20 Summit. The dramatic move by Italy’s government is a result of growing Italy’s trade deficit with China which has increased to US$ 23.9 billion in 2022, coupled with the debt trap issue, pressure from the West, no special treatment from China, and Italy’s re-alignment with the West and its G7 Presidency made Italy to reconsider its decision and move away from BRI. Though, such decision will not end Italy business ties with China, as Italy’s official argues the bilateral ties will be maintain and the government is moving forward with strategic partnership which will focus on economic cooperation.

As the G20 Summit was a success like witnessing a balanced, unified and much needed joint statement on the Russia-Ukraine conflict, the summit also witness the launch of the India-Middle East-Europe Economic Corridor. The project being a part of the Partnership for Global Infrastructure and Investment (PGII) which was launched by the G7 in 2021 replacing the US Build Back Better World as it failed to impact China’s BRI. With India, the US, the UAE, Saudi Arabia, the EU, France, Germany and Italy being signatories to IMEC, question are being asked will it rival China’s BRI or become another dead on arrival undermining West’s smear against China – China vehemently critique such West’s stand.

What is the India-Middle East-Europe Economic Corridor (IMEC)?

The IMEC being a part of the PGII is viewed with great substance to strengthen West’ strategic move to counter China and the BRI’s reach, influence and power worldwide. Many political pandits argues that the project is of historical significance – geopolitical and economic – which will accelerate development and interconnectivity and integration between Asia, Middle East and Europe transforming it as a new locus of global power centre. As the proposed project will consist of road transport, railroad and ship to rail networks connecting India with Europe via Arabian Peninsula. With the IMEC divided into two parts the East Corridor – connect India with Arabian Gulf – and the Northern Corridor – connect Gulf with Europe – it also include an electricity cable, a hydrogen pipeline and high-speed data cable. The below image and table illustrate the project and its key connecting points:

As IMEC is directed to transform and facilitate trade through the connecting route in partnered nations and projected as a potential counter to BRI and China’s growing economic and political influence in the Eurasian region. It could reduce political tension in the Arabian peninsula, deepen India’s strategic engagement with the peninsula, offer strategic advantage and opportunity to US and could extend to Africa to promote the US and EU’s plan to develop a Trans-African corridor. On the economic front, the project will be reflected as infrastructure of peace in Arabian peninsula, promote seamless movement of goods, reduce transmit times, boost economic growth in partnered nations. Furthermore, it will facilitate secure energy and resource supplies, strategically leveraged to develop Special Economic Zones (SEZ) and boost economic growth in partnered countries.

Will the new economic corridor succeed in countering China’s BRI?

With IMEC launched to simulate economic development via connectivity for which partnered nations have signed Memorandum of Understanding to supplement the existing maritime, road and rail network and incentivising new investments in the region. Among other benefits, the project will facilitate development and export of clean energy, strengthening food supply, link energy grid and supply chain; while connecting Asia and Europe with the commercial hub. The project being so beneficial and projected as a great option for other countries to garner benefit and become a part of this journey, on the other hand, questions are being raised will it compete or can be compare with China’s BRI?

               As both mega transnational projects are similar, but the BRI is larger than the IMEC in terms of scale, and many members of the IMEC like Saudi Arabia, the UAE and Italy are part of the BRI. On the question of BRI vs IMEC, IMEC’s policy document didn’t talk about China or BRI or the project is alternative to the world. Though finance will not be an issue to promote the IMEC’s project and as per the preliminary report each member will allocate US$ 20 billion towards its development. As it is evident that the BRI is a decade ahead of IMEC, the IMEC will be finalised when partnered nations meet again after two months to tune up its fine details becoming clear how it will compete with China’s BRI, in a growing US-China geo-rivalry.

               The IMEC as it intend to counter BRI and undermine Chinese presence and influence, on the other hand, it can’t be done as its being discussed or said openly. With the Piraeus port and Etihad rail project are part of IMEC connectivity project, the Chinese presence in Europe and Middle East cannot be ignored. As the port is controlled by China Ocean Shipping (Group) Company; a Chinese state-owned company and the rail project includes involvement of China’s PowerChina and China State Construction Engineering Corporation etc and the IMEC partner countries are aware of such a situation. Further, as the BRI caused debt issue in the partner countries and China not being a member of the Paris Club – a group of officials from various creditor countries – caused impacted countries to find a coordinated and sustainable solution to their issue and however such aspect is absent in the IMEC.

               However, with BRI having its advantages, issues, problems and concerns and coupled with China’s slump economic recovery, the road for the initiative will not be smooth in coming years considering growing US-China geo-political rivalry. Although, the US still tied to China’s supply chains, initiatives like IMEC, PGII, I2U2 bloc and strengthening of strategic partnership with like-minded countries and allies and friends – friendshoring and nearshoring – will end the US dependence on China directly or indirectly. As IMEC pitched the US as an alternative partner and investor to developing nations and US’s attempt to fight China’s BRI. China argues that US’s IMEC will be another US rail plan going nowhere as it faces internal infrastructural issues and only reflect as a political tool than an infrastructure project to coax relevant nations, make other nations US pawn and to squeeze growing China’s global influence.

Despite such criticism, unlike the BRI which is a China-centric project with the flow of investment comes from China causing debt trap. In comparison the IMEC is a project based on cooperation and increases the scope of alignment of shared interest among its members giving ample opportunities to them to join hand in many other projects like to build a pipeline for the flow of clean hydrogen in the near future. With IMEC being vital, its success hinges on adept diplomacy and the aligned interests of participating countries; while paying attention to lesson learned from China’s BRI.

Conclusion

With growing geo-political competition between the US and China, as it launched the IMEC during recent G20 Summit in Delhi, such development has caused worry in China, but didn’t received a backing from Turkey who also launched an alternative to the IMEC. The road ahead is full of challenges and prospects for like-minded countries to come together and nations like China to look for means to remain relevant and secure projects like BRI to achieve its Chinese Dream 2049. However, IMEC is promising to the developing countries and partnered nations, which will benefits all its members unlike China which largely benefitted China and has caused worry and trouble for its partnered nations.