WASHINGTON – A far-reaching plan to channel Europe-Asia trade through the Middle East is at risk of stalling before it even gets started.

The Israel-Hamas war has halted progress on what is known as the India-Middle East-Europe Economic Corridor (IMEC).

It was a project touted in 2023 by Washington and key allies that envisages building new rail links across the Arabian peninsula.

As Houthi attacks disrupt Red Sea shipping and turmoil spreads across the region, IMEC is effectively on ice.

That is a setback for US strategy, because the plan served multiple purposes: counter China’s Belt and Road infrastructure programme, build influence in the so-called “Global South”, and speed up the hoped-for rapprochement between Israel and Saudi Arabia.  

“This is a project that made Iran, China, Russia, even Turkey nervous,” said Ms Romana Vlahutin, the former European Union special envoy for connectivity who is now a distinguished fellow at the German Marshall Fund of the United States. “Maybe that is the best proof of its strategic importance.”

Asked whether the regional conflicts had stopped the project, US National Security Council spokesman John Kirby said in a briefing on Jan 23 that efforts to lay the groundwork are “ongoing”.

“While it’s principally around a rail system, there would be all kinds of logistics and sustainment hubs along the way, and offer all kinds of opportunities for infrastructure improvement and employment,” Mr Kirby said. “That’s a years-long process.”

A person familiar with the plans earlier said the outbreak of violence in the Middle East has diverted attention from discussions on IMEC.

‘Game-changing’

In their contest with China for global influence, the US and Europe have struggled to win support in the developing world. Many emerging nations stayed neutral in the face of Russia’s invasion of Ukraine and backed an immediate end to Israel’s war in Gaza – declining to follow the American line in both cases. 

To bolster their leverage, Group of Seven countries are engaging in what some have dubbed a battle of offers – holding out the prospect of tangible infrastructure projects, rather than appealing to shared values.

IMEC was one of the most ambitious. It was cemented at September 2023’s Group of 20 (G-20) summit, in a three-way handshake between an unlikely triumvirate: US President Joe Biden, Indian Prime Minister Narendra Modi and Saudi Crown Prince Mohammed bin Salman. 

The announcement caught many by surprise. Its centrepiece was a new rail route that would link up with existing maritime and truck transport networks. Mr Biden called it a “game-changing regional investment”.

Analysts saw the project as a step towards the administration’s real prize: a pact between Israel and Saudi Arabia.

In Davos last week, US National Security Adviser Jake Sullivan said the US approach had been “to work towards a package deal that involved normalisation between Israel and key Arab states” as well as “a political horizon” for Palestinians. “That was our goal before Oct 7,” he said.

Hamas’ attack that day triggered Israel’s war in Gaza – which threatens to spill over on multiple fronts, drawing in Hamas allies such as the Houthis and Hezbollah, as well as the US.

‘Promising on paper’

All this chaos put an abrupt stop to IMEC. The 4,800km route runs through countries now on high alert in case they get caught up in the war.

Arab public outrage over the civilian death toll in Gaza means governments of IMEC participants like the United Arab Emirates must tread carefully. Saudi Arabia is ruling out any deal with Israel unless there is a clear path to a Palestinian state. 

Of course, IMEC – a project that fitted neatly into American geopolitical rhetoric but remained light on detail – might have foundered even absent a Middle East war. 

“While IMEC certainly looked promising on paper, complex regional dynamics were always going to pose implementation challenges,” said Mr Craig Singleton, a senior fellow at the Foundation for Defence of Democracies, a Washington think-tank. 

Among the signers of September’s agreement, there is clear impetus to restart the deal if regional tensions ease.

The “strategic rationale remains unwavering, even stronger”, said Mr Mohammed Soliman, director of the strategic technologies and cyber security programme at the Middle East Institute in Washington. “Participating countries remain deeply committed to this vision.”

Mr Biden has referred to the “historic” project on several occasions since the G-20 summit – including citing it as a way of countering Belt and Road.

“We’re going to compete on that,” the US President told a White House press conference in October 2023. “We’re doing it a different way.”

‘A massive chance’

Mr Biden is gearing up for a November 2024 election that will most likely be a rematch pitting him against Donald Trump.

With both US parties committed to a hard line against China, the Biden administration has been seeking to set its foreign policy apart – including by emphasising its readiness to work with allies on multilateral projects. 

Architects of the IMEC plan acknowledge there is an urgency to such efforts right now, amid rapid shifts in the global order led by the US since World War II. 

Asked about those changes in Davos, Mr Sullivan cited the importance of “giving greater voice to countries that did not have that voice back after 1945, but deserve it today”. 

Ms Vlahutin said that with Western capital now seeking alternatives to China for investment, “the countries in the so-called Global South, and in particular India, have a massive chance”. 

Still, in some respects the US and its allies are playing catch-up with China, which launched Belt and Road more than a decade ago. 

“Washington is seriously struggling to counter China’s grand economic vision,” Mr Singleton said. “The collapse of IMEC is a stark reminder that grand strategic plans often stumble in the face of harsh geopolitical realities.” BLOOMBERG