Last week we covered the formal announcement of the India-Middle East-Europe Corridor (IMEC) in our Investment TACs article dated September 10, 2023 in Section 4 titled “Nothing but historic“; “The Deal“; “Lawrence of Arabia mega“. That article also summarized what we had written earlier about this project:
- Not Just Lawrence of Arabia Mega but Global Greece-Rome-Middle East-Indian Ocean Mega? – dated May 14, 2023
- Adani Washout – Our Reflections – February 5, 2023
Now that this corridor has been ceremoniously announced by President Biden, President Ursula von der Leyen of EU & Prime Modi of India, it is time to look at what prompted this corridor, what are the basic goals of the various nations involved and which nations have reasons to try to speak & act against this corridor.
First look at the blue sea between Saudi Arabia & Africa. That connects with the Mediterranean through the Suez Canal. Surely the word “canal” seems laughable for the economic behemoth that has set a new record with annual revenue of $9.4 billion in USD for the fiscal year that ended June 30, 2023. That is because the Suez Canal has no competition.
1. Geography dictates History – Israel’s as IMEC’s Largest % Beneficiary
Israel has tried for years to consider building a canal running through Israel from the Red Sea into the Mediterranean via Israel. They even called it Ben Gurion Waterway.
First, this project was estimated to cost at least $20 billion build. Secondly, it would not benefit from any new source of shipments or revenue. And if you were to compete against the Suez Canal, shouldn’t you look at why the Suez Canal became of paramount importance & to whom? It certainly was not to Saudi Arabia or to the UAE, two principals in the planned IMEC corridor.
Heck, even moviemakers have known the answer for decades: (minute 2:00 to 2:31 below)
- British Military Advisor – “Put that out of your mind Sir, the Navy has other things to do“;
- Prince Faisal – “Oh yes! Protecting the Suez Canal“;
- British military advisor – “the one essential sector of this front is & must be the (Suez) Canal; you can see that Sir, surely!”
- Prince Faisal – “I see that the Canal is an essential British interest; it is of little consequence to us“.
The Suez canal was the absolutely critical link between Britain of the colonial era and India, Britain’s largest & most important colonial possession. History teaches us names of the actors may change but geographical reality does not. Today EU is the main economic power in Europe & India, at least for the past ten Modi years, is already the 5th largest economy in the world & could possibly become the 3rd largest in a few years.
And yet the EU & India do not have a fast direct economic thruway! In between the two lie Saudi Arabia & the UAE, two of the largest economic powers in the Middle East. We don’t know whether it was Mr. Netanyahu or Mr. Modi who saw the opportunity but it doesn’t matter. It helped that the UAE is friendly to Israel & almost a eco-strategic partner of Modi’s India.
Ergo, Israel’s decision to sell the Haifa Port to Adani Enterprises of India just as a mega-storm was launched at the Adani group by Hindenberg Research. Despite all the media tumult, Israel remained firm in its support of the Adani purchase & Mr. Adani travelled to Haifa to close the purchase even at the cost of missing the launch of Adani financing deal.
Look what PM Netanyahu said upon the formal announcement of the IMEC corridor:
- “largest cooperation project in our history” will change the face of the Middle East, Israel, and will benefit the entire world.
- “Our railways and ports will open a new gateway from India, through the Middle East, to Europe, and back – from Europe to India via Jordan, Saudi Arabia and the UAE,“
Imagine who will benefit the most in percentage terms IF the IMEC corridor becomes even 25% as important to EU-India eco-trade relationship as the Suez was to Britain-India during colonial times. Also moving east geographically notice how Turkey has benefited by being the land bridge between Middle East & Europe. Thanks to this corridor, Israel can not only be a rail bridge between Middle East & Europe but it can also be a driver of telecommunications & data transfer technology infrastructure.
This is why Israel, with the support of Greece, has invited Modi’s India to become a member of the trilateral grouping of Israel, Cyprus & Greece. See how much Israel stands to gain from the IMEC corridor without having to spend even a fraction of what the Ben Gurion waterway would have cost!
That is just a brief summary of why we think Israel is likely to be the largest percentage gainer from the IMEC corridor.
2. USA-Saudi Arabia – the 20th century parallel & the new 21st century direction
Just as Colonial Britain-India relationship was critical and unambiguous in the 19th century, the USA-Saudi Arabia relationship became critical and unambiguous in post WWII 20th century. President FDR stated clearly & unambiguously in February 1943 – “the defense of Saudi Arabia is vital for the defense of United States“. With that began the clearest & most unambiguous partnership of post WWII 20th century! It also began the absolute dominance of the U.S. Dollar as the world’s reserve currency & chief trade currency.
Unfortunately, the relationship looks much more ambiguous & less clear now in 2023. The fracking technology converted America into a oil producing giant and less dependent on Saudi Arabia. Then came the insult to Mohammed bin Salman (MBS), Saudi Crown Prince & leader.
We saw Saudi Arabia join the BRICS group and we have seen Saudi Arabia working closely with Russia to manage OPEC & to keep the oil price high. These two events are definitely turning Saudi Arabia away from America and from the U.S. Dollar.
On the other hand, the core MBS goal is to transform Saudi Arabia & its youth into a modern diversified economy that is integrated with the rest of the world. And the best example he sees is what India has become in the last 8 years under PM Modi. And the Saudi youth already know about India, at least the Bollywood sphere. Now they have heard about the Chandra-Yaan soft landing on the south pole of the Moon. And MBS has seen what the Indian diaspora has done for the economy of both Dubai & Abu Dhabi.
Now with the IMEC corridor, Saudi Arabia will benefit from the increased trade between Europe & India but also from the easy transport the railway will provide for visitation to both Europe & India. A Saudi Arabia more integrated with India & UAE on one hand and EU-Israel on the other hand is a better Saudi Arabia both for MBS & for young Saudi Arabians.
Getting back to America and the US Dollar, India is a major impediment to Chinese attempts to undercut the Dollar & India is a supporter of both America & Russia within the BRICS. So a Saudi Arabia linked in the economic IMEC corridor is an absolute plus for America.
Finally who could be a loser if UAE-Saudi Arabia-Jordan with Israel become a rail & sea bridge between Europe & the Indian Ocean? Turkey – the current land bridge between Europe & Iraq-Iran & Central Asia.
And who despises Turkey the most for its current behavior & its history as the Ottoman invader of Arabia? – Saudi Arabia.
This makes us optimistic about the benefits of the IMEC corridor for Saudi Arabia and the benefits of Saudi Arabia as a happy & energetic member of IMEC to everyone the IMEC corridor touches.
3. America’s role in driving the IMEC corridor.
We think the final & most powerful push for the IMEC corridor came from America. It was on May 6 when Axios reported that
- Jake Sullivan, United States National Security Advisor, met with Mohammed bin Salman, Saudi Prime Minister and Crown Prince; Sheikh Tahnoon bin Zayed Al Nahyan, UAE National Security Advisor and Ajit Doval, National Security Advisor of India, on Sunday in Riyadh, lending credence to a report that the three Asian countries are getting together to create a major railway network“.
Frankly, we were happy to discuss this on May 14, 2023. The main involvement of National Security Advisers lent a powerful message to all participants. And, as we hear, US-NSA Jake Sullivan became the main driver. And President Biden had instructed his entire team to get this deal done at the G20 Summit in New Delhi last week. He views it as a monument to his presidency.
So it got done & announced.
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