Israel Hamas War Is India Middle East Europe Economic Corridor At Stake – BW Businessworld

It was just another Saturday in Israel and citizens were wrapping up the seven-day Jewish festival of Sukkot. What followed after that was absolute carnage as a full-fledged sudden attack was being waged from the sky, sea and ground on Israel by Hamas militants. 

Amid the sirens echoing across the nation, the surprise terror attack left hundreds of people dead and buildings decimated, causing panic across the globe. According to the Israel Defense Forces, Hamas fired approximately 2,200 rockets toward southern and central Israel along with Tel Aviv and Jerusalem. However, Hamas claimed that it fired about 5,000 rockets. 

Prime Minister Benjamin Netanyahu-led Israeli government also declared war and started “significant military steps” to retaliate against Hamas for its surprise attack and intensified its bombardment of the Gaza Strip. According to the media reports, over 1,200 Israeli people have died in this attack. The Gaza Ministry of Health on Wednesday said that about 1,100 people, including at least 326 children, have been killed and 5,339 have been wounded in the Gaza Strip by Israel’s retaliatory strikes.  

As war in Europe caused massive supply, the latest escalation in West Asia could also impact several areas of the global economy. According to experts, in case the Israel-Hamas conflict leads to full-scale war, global stability is likely to be disrupted by similar consequences of Russia’s invasion of Ukraine. 

Notably, the latest in the line is the India-Middle East-Europe Economic Corridor (IMEC), a strategic collaboration involving the United States (US), European nations, the UAE, Saudi Arabia and India. The aim of this massive project is to enhance logistics, promote trade and strengthen regional bonds, positioning itself as a driver of global economic growth. 

However, the ongoing Israel-Palestine conflict has raised concerns about the project’s timelines and potential investments. The conflict has understandably made potential IMEC participants cautious. Investors typically seek stability and predictability, which become scarce during regional turmoil. This development has consequences even in India’s domestic market, where logistics, construction and railway stocks experienced a notable surge following the IMEC announcement,” said Sanjeev Agrawal, President, PHD Chamber of Commerce and Industry (PHDCCI)

Observers are optimistic about the positive impact of this massive corridor, especially for India. However, experts told BW Businessworld that despite the huge potential of this project, there are various challenges to meeting its fate and now this war is posing extra hurdles. 

“In the recent G-20 summit at New Delhi, India Middle-East-Europe Economic Corridor (IMEC) was conceived and MOU was entered. IMEC is of strategic importance for India and also a counter to China’s Belt and Road Initiative (BRI).  If the Israel-Palestine conflict is converted to full-scale war then, not only IMEC but global stability shall also be affected, somewhat similar to the Russia-Ukraine war,” commented RP Gupta, Author and Economist. 

The trade partnership between India and Israel, amounting to approximately USD 10.7 billion in FY23, faces a significant risk if the operations of Israel’s three largest ports— Haifa, Ashdod and Eilat— encounter disruptions. These ports play a pivotal role in handling shipments of various goods, including agricultural products, chemicals, electronics, machinery and vehicles. Notably, Eilat, located on the Red Sea, serves as the primary gateway for India’s merchandise trade with Israel. Fortunately, as of now, there have been no reported disturbances at these ports. 

“However, the actual impact on trade will depend on the duration and severity of the ongoing conflict. India, with its deep diplomatic and economic relations, seems poised to maintain unaffected trade and economic cooperation with both Middle Eastern countries and European nations,” added Agrawal. 

A Massive Arab World
Over the period of time, geopolitical crisis, especially the Iran tensions and Palestine issue, have dominated the Middle East region. While talking to BW Businessworld earlier, experts said that IMEC’s trade incentives might catalyse dialogue to address these longstanding problems. But, the current escalation has added fuel to the fire.

In the event that the conflict escalates and draws in the Arab world, which has occurred historically, India will be faced with a delicate diplomatic balancing act. India’s growing influence as a diplomatic power plays a pivotal role in this complex situation. 

To this corridor, Israel’s advanced technology and innovation capabilities and collaboration with the Kingdom of Saudi Arabia (KSA) and UAE present strategic benefits, including access to their abundant energy resources, bolstering India’s energy security and economic growth. Notably, a cost-effective cross-border ship-to-rail transit network akin to the Etihad Rail in the UAE is expected to reduce the cost of transportation across the corridor. 

“The northern corridor’s success depends heavily on Israel, with the Adani-dominated Haifa port expected to play a pivotal role. The route may extend to a port in Italy, potentially northern Greece ports like Kavala, Volos, or Alexandroupoli. This initiative promises to reshape regional and global trade dynamics,” told Arun Singh, Global Chief Economist, Dun and Bradstreet (D&B) BW Businessworld earlier. 

Notably, India has strategically engaged with all stakeholders in the West Asian region, recognising the importance of such engagement. With a substantial Indian expatriate community in the region and strong diplomatic ties, India plays a significant role in promoting peace and stability. 

“However, the Israel-Palestine conflict presents India with a diplomatic challenge. While it tests India’s diplomatic skills, it also calls for a reaffirmation of its multifaceted approach in the region,” PHDCCI’s Agrawal stated. 

India’s Strategy
After independence, India adopted a foreign policy of non-alignment and had always advocated for peace. India has good relations with Palestine and Israel besides Russia, the USA, the European Union (EU), the Organisation of the Petroleum Exporting Countries (OPEC) and the Organisation for Economic Co-operation and Development (OECD) nations. Notably, India has helped Palestine by investing particularly in the education sector and providing humanitarian aid to the people of crisis hit Palestine. 

“In 2018, our prime Minister also visited Palestine and was honoured. India also maintains good relations with Israel besides having international trade of about USD 10.0 billion. I believe that; the short-term economic interest of either nation must not be overweight in such a situation,” asserted Gupta.  

Experts pitched for peace and stated that war affects not only economic prospects but also leads to huge human suffering. They noted that at a time when the global economy is interconnected, war must be avoided and the United Nations (UN) and big powers like G-20, G-7 and BRICS must intervene to resume peace through mediation.