Can the IMEC address the Red Sea crisis?

News Excerpt:

As the Red Sea crisis enters its fourth month, global supply chains increasingly grapple with inflated freights, delayed vessel schedules, and product shortages.

Why is the Red Sea route important?

  • The Red Sea is strategically important for global trade with the Bab el-Mandab Strait between Yemen and Djibouti. 
  • It is one of the world’s busiest cargo and oil transit points with almost 12% of international merchandise trade passing through it. 
  • An immediate consequence of the Red Sea conflict has been that major container and oil carriers have been forced to re-route shipments via the Cape of Good Hope. 
    • The re-routing has led to rising ocean freight, inflated insurance costs, and longer voyage times, leading to delays and shortages of products. 
  • It has also driven up transportation costs. The higher shipping costs will be passed onto consumers in the form of increased commodity prices.

How has it affected India?

  • India’s trade with European and North African countries flows entirely through the Red Sea route, which accounts for almost 24% of its exports and 14% of its imports. 
  • In the year 2022-23, India’s bilateral trade with Europe and North Africa stood at $189 billion and $15 billion respectively. 
  • The rising fears among traders have already seen a drop in Indian shipments. 
  • As per the Federation of Indian Export Organisations (FIEO), rising threats have prompted Indian exporters to hold back around 25% of their cargo ships transitioning through the Red Sea.
  • As global supply chains are battling delayed shipments and rising costs, China is actively projecting China-Europe freight trains, which are part of the Belt and Road Initiative (BRI), as an alternate route. It will raise India's tension.

About IMEC:

  • On the sidelines of the G20 Leaders’ Summit, Leaders of India, the European Union, France, Germany, Italy, Saudi Arabia, UAE, and the US announced an MOU committing to work together to develop a new India-Middle East-Europe Economic Corridor (IMEC). 
  • The IMEC will comprise two separate corridors
    • the east corridor connecting India to the Gulf and 
    • the northern corridor connecting the Gulf to Europe.
  • The corridor will provide a reliable and cost-effective cross-border ship-to-rail transit network to supplement existing maritime routes. 
  • It intends to increase efficiency, reduce costs, secure regional supply chains, increase trade accessibility, enhance economic cooperation, generate jobs and lower greenhouse gas emissions, resulting in a transformative integration of Asia, Europe and the Middle East (West Asia).
  • The IMEC corridor, which aims to integrate Asia, Europe and the Middle East, involves multiple stakeholders and is at an incipient stage.

Challenges regarding the India-Middle East-Europe Economic Corridor (IMEC):

  • Lack of investment: Apart from the MoUs, there have not been any investments or operations regarding the corridor. 
  • Vulnerability of the Strait of Hormuz: The entire trade of the IMEC architecture flows through the Strait of Hormuz, and with Iran’s proximity and control over the strait, the risk of disruptions remains very high.
  • Geopolitical challenges: The corridor spans diverse nations with complex geopolitics, and navigating these tensions will be crucial for the project's success. Shippers are not balking at taking the long, circuitous voyage around Africa.
  • Economic challenges: Some economists and regional experts have expressed reservations about the feasibility of achieving IMEC's objectives, such as cutting transportation costs and boosting trade. 
  • Regulatory challenges: The project's implementation will require coordination and cooperation among multiple countries, which may face regulatory hurdles and bureaucratic delays.
  • Security challenges: The IMEC will likely face significant security challenges, including threats from extremist groups and illicit activities due to geopolitical rivalries.
  • Interstate tensions: Conflicting interests of trade powers may result in power struggles and potential resistance during the project's implementation.
  • Uncertainty: The Israel-Hamas war has added further complexity to the initiative, and its outcome remains uncertain at the time of writing

How can the IMEC be made viable?

Despite such challenges, the economic logic of the corridor holds, which should encourage stakeholders to keep working towards it. 

  • First, an empirical study on the economic benefits of the corridor needs to be conducted. 
    • The corridor is estimated to cut the journey time from India to Europe by 40% and slash transit costs by 30%. 
    • However, there are speculations that multiple cargo and multi-nation transit handling would increase carriage and compliance costs. 
    • Therefore, it is critical to quantify the economic advantages of the corridor to attract more stakeholders. 
  • Secondly, a robust financial framework needs to be in place. 
    • Since there are no binding financial commitments on any of the signatories of the corridor, investments will have to be attracted from governments, international organisations, and private sector entities.
  • Lastly, a comprehensive multi-nation operational framework is needed. 
    • A multi-national framework is necessary as the corridor facilitates trade across different legal systems. 
    • A forum for the corridor needs to be constituted to undertake the aforementioned activities.


The Red Sea crisis has once again brought to the fore the vulnerabilities of global supply chains, highlighting the need to revisit alternate routes for global trade. The world can find its solution in IMEC but proper strategy and cooperation will be needed.

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