Can India’s Eurasian trade corridor give China a run for its money?

At a summit of world leaders, Indian Prime Minister Narendra Modi announced an ambitious new economic corridor project that will link India with the Middle East and Europe. 

European Commission President Ursula von der Leyen has described the project as “a green and digital bridge across continents and civilizations.” U.S. President Joe Biden called it “game-changing,” and Saudi Arabia’s Crown Prince Mohammed bin Salman praised the “historic” announcement.

This new link, Mr. Modi said at the G20 last week, “will drive sustainable development for the entire world.”

It’s true that the India-Middle East-Europe Economic Corridor (IMEC), if completed, will accelerate trade between the regions, and would likely help boost political cooperation and energy security. It’s also a clear challenge, experts say, to China’s Belt and Road Initiative (BRI), a massive infrastructure corridor stretching across Asia, Africa, and Latin America that gives China considerable international influence. However, details on the IMEC remain thin. It’s not yet clear how the corridor will be built, or who will foot the bill.

“It’s significant because of the sheer scale. The number of participants and the geography covered is immense,” says Michael Kugelman, director of the South Asia Institute at the Wilson Center think tank in Washington. “Of course, the sheer scale could also prove to be its undoing – too ambitious and complex to see the light of day.”

The IMEC plan is broken into two segments: Through a combination of railroads, ship routes, and roadways, the eastern corridor will connect India to the Persian Gulf, and the northern corridor will connect the Persian Gulf to Europe. Hydrogen pipelines and electricity cables will also be built along the rail routes, according to a memorandum of understanding signed by India, the United States, Saudi Arabia, the United Arab Emirates, the European Union, Italy, France, and Germany.

The IMEC announcement comes just a month before 90 countries are expected to gather in Beijing for a major BRI conference. Since 2013, China has poured billions into the project, which has been touted as the brainchild of Chinese leader Xi Jinping and involves more than 150 countries and dozens of international organizations.

In fact, some IMEC backers, including Saudi Arabia and the UAE, are already part of the BRI. Others view China’s sweeping initiative as a form of “debt-trap diplomacy” – securing geopolitical influence by lending poorer nations unrepayable sums for infrastructure projects.

“Many of the countries involved in this [IMEC] scheme won’t want to approach it with a China lens, but that’s an unavoidable frame from a U.S. perspective,” says Mr. Kugelman. “U.S. officials have already depicted this project as transparent, inclusive, and noncoercive, drawing a sharp and explicit contrast with what it believes to be the BRI investment model.” 

India has been at loggerheads with China on the BRI, as one of its major offshoots, the China-Pakistan Economic Corridor (CPEC), passes through Pakistan-administered Kashmir, part of a hotly disputed Himalayan territory currently divided between India, Pakistan, and China. New Delhi considers northern Kashmir to be illegally occupied by Islamabad and says any country that participates in the expansion of the CPEC will “directly infringe on India’s sovereignty and territorial integrity.” 

India signed a deal with Iran in 2016 to develop its own CPEC-like corridor, but the project has faced many roadblocks and was further derailed by U.S. sanctions on Iran.

India and China have also been locked in a tense border faceoff since soldiers from both sides were killed in a 2020 clash, and Mr. Xi skipped the Delhi summit.

So far, China doesn’t seem very threatened by the IMEC, stating shortly after the summit that it welcomes the new corridor. “At the same time, we advocate that various connectivity initiatives should be open, inclusive, and form synergy, and should not become geopolitical tools,” the foreign ministry said in a statement to Indian press. 

Chinese officials know that “when it comes to infrastructure building, they are the No. 1 in the world,” says Pravin Sawhney, a journalist and expert on India’s national security, voicing concerns about the IMEC’s future. “They are the ones who have the deep pockets, and they know BRI is 10 years ahead.”

Yet the BRI finds itself on shaky ground as well. 

China’s economic growth is slowing, leading to deflation and fears of stagnation. And amid growing accusations of predatory lending, partner countries have started demanding to renegotiate the terms of their loans. Italy is poised to pull out of the BRI altogether.

Whether India can use this moment of uncertainty to shift the scales of influence depends on its ability to get the IMEC off the ground.

“As of now, we don’t know who will fund it, [and] nobody knows who will ultimately agree to it,” says Mr. Sawhney. “As far as the USA is concerned, there are so many commitments they have made in infrastructure building which remain incomplete. The latest is the Indo-Pacific Economic Framework,” an initiative launched last year and promoted as an opportunity to balance China’s influence in Asia. 

Mr. Kugelman shares some of these concerns but believes the project still carries promise.

“Despite the challenges, the geopolitics of this are too important to overlook,” he says. “Three different regions and the U.S. working together to promote connectivity, on a large scale, in a broad expanse of territory home to key land and sea routes for trade.”

Officials involved in the IMEC say they’ll have a more detailed plan for building out the corridor in the next couple of months. Meanwhile, analysts are watching the progress of this megaproject carefully, seeing it as an indicator of U.S. investment in India, as well as attitudes toward China.