IMEC potential to address Red sea crisis

Source-This post on MEC potential to address Red sea crisis has been created based on the article “Can the IMEC address the Red Sea crisis?” published in “The Hindu” on 22 February 2024.

UPSC Syllabus Topic: GS Paper 2 International Relations – Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

News-The article discusses the potential of India-Middle East-Europe Economic Corridor (IMEC), which was announced during the G-20 summit in 2023 to address the Red sea crisis.

What is the red sea crisis?

It is an ongoing military standoff that began on 19 October 2023, when the Iran-backed Houthi movement within Yemen launched a barrage of missiles and armed drones at Israel.

The Houthis have staged multiple seizures of civilian-operated cargo ships sailing near the Yemeni coast and have claimed any Israel-linked shipping as a target. However, they have targeted multiple vessels with no apparent link to Israel.

Read more- Present challenges in the Red Sea-The stormy Red Sea

What is the significance of Red sea?

1) Strategic significance-Bab-el-Mandab strait is   one of the world’s busiest cargo and oil transit points. It accounts for almost 12% of international merchandise trade passing through it. This strait is located on red sea between Yemen and Djibouti.

2) Economic Significance – Due to the ongoing crisis, major container and oil carriers are 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 shortage of products.

What is the impact of crisis on India’s interest?

1) Economic impact-India’s trade with European and North African countries flows entirely through the Red Sea route. This route accounts for almost 24% of its exports and 14% of its imports.
Due to ongoing crisis, there is drop in Indian shipments. For instance – As per the Federation of Indian Export Organisations (FIEO), Indian exporters have held back around 25% of their cargo ships transitioning through the Red Sea.

2) Stategic Impact –The current crisis has provided China with an opportunity to project China-Europe freight trains, as an alternate route, which are part of the Belt and Road Initiative (BRI).

How can India-Middle East-Europe Economic Corridor (IMEC) address the Red sea crisis?

The IMEC was announced during the G-20 summit in 2023. It is estimated to cut the journey time from India to Europe by 40% and slash transit costs by 30%.
The entire trade of the IMEC architecture flows through the Strait of Hormuz thus it would minimize dependence on the red sea.

What are the problems with India-Middle East-Europe Economic Corridor?

1) Lack of adequate attention-It is not receiving much attention. There have not been any investments or operations regarding the corridor.

2) Regional conflicts– Due to the Israel-Palestine conflict, Arab-Israel relations, have worsened, creating a huge hurdle.

3) Stategic location– Iran’s proximity and control over the Strait of Hormuz may lead to frequent disruptions.

What is the way forward?

1) As per some expert, Strait of Hormuz problem can be avoided by including Oman in the IMEC architecture and keeping the supply chain away from Iran’s reach.

2) There is a need to conduct an empirical study on the economic benefits of the corridor.

3) There should be a robust financial framework which attracts investments from governments, international organisations, and private sector entities.

4) Since the corridor involves facilitating trade across different legal systems, there is a need for a multinational framework.