The war in Gaza undermines the Prospects of the Economic Corridor
The war in Gaza poses a significant challenge to the reshaping of economic corridors in the Middle East. The India to Europe Economic Corridor (IMEC), which extends from India through Israel, clearly clashes with the security factor, considered essential by many investors who might refrain from entering it due to the substantial risks it represents, especially if the conflict expands to include other Middle Eastern countries.
The initial cost of completing this project is approximately $20 billion, allocated for the development of railway networks and several ports in European countries such as Greece, France, and Italy. Foreign direct investment in Israel declined by 60% in the first quarter of 2023 compared to the same period in 2020 and 2022, as the recent events in Gaza widened the gap.
The war has also led to the suspension of gas exports from the Tamar field, one of Israel’s largest gas fields, which accounts for 40% of its annual natural gas production.
The Gulf-European development road project, passing through Iraq and Turkey, is the most feasible. Iraq, being an oil-rich country, can complete this project and provide the necessary financial allocations to achieve it. The initial cost of the project is $17 billion, equivalent to about 11% of the country’s budget for this year, 2023.
Additionally, there is significant Turkish interest in completing this project as quickly as possible, which aligns with Iran’s ambitions to enhance cooperation between the development road and the North-South corridor, connecting Russia to the Arabian Gulf through Iran. The agreement of Turkish and Iranian interests in this project would have positive results in achieving security and stability in the areas where the development road passes, reducing risks compared to the ongoing conflict in Israel.
A New Gas Route
The economic strength of the development road is not limited to transporting goods between the East and the West. There is also a parallel energy route through which Qatari natural gas will be transported to Europe via Iraq and Turkey.
Qatar has signed agreements with Shell and Total Energies to supply up to 3.5 million tons of liquefied natural gas annually to each of them starting from 2026 for 27 years. The plan is to increase Qatar’s production of liquefied natural gas from its shared North Field with Iran by over 60% to reach 126 million tons annually by 2027, supporting the establishment of a pipeline network across the Gulf waters, extending north to Iraq and then to Turkey and Europe.
If this is achieved, the cost and time of natural gas transport would be minimized, providing additional European support for the development project, especially since Europe is eager to find suitable alternatives to Russian gas as quickly as possible.
This aligns with Iraq’s agenda and its future ambitions to export natural gas to global markets, working on boosting investments in the development of gas fields in the western and southern parts of the country, and utilizing clean energy for electricity generation, potentially achieving self-sufficiency within the next three years.
A Vital Role for Erbil
Turkey is intensifying its diplomatic efforts to support the development road and commence it in the coming three months. Its Foreign Minister, Hakan Fidan, has held meetings on this topic with counterparts from Iraq, Qatar, the UAE, and India, which is open to increasing its exports to Europe, either through the economic corridor or the development road.
Turkey fears that the economic corridor, which deviates from its geographical map, could marginalize it, especially as it sees these corridors as a key player in political and economic influence that will impact the region’s and the world’s future.
However, Ankara is concerned about an important factor that might be a source of concern for the development road, which is the presence of the Kurdistan Workers’ Party in the southwest of the country and some areas in northern Iraq.
Thus, Turkey might need to collaborate with Erbil to find a negotiated path with the leaders of the Workers’ Party instead of military operations that could hinder the development road and undermine investor confidence.
Another issue to highlight is the understanding between Baghdad and Erbil regarding several important matters, such as disputed areas and oil and gas law. It is expected that both Ankara and Tehran will have a role in this context to bring the views of the two sides closer and achieve political stability in Iraq.
American Iranian Agreement
On the other hand, Washington does not oppose any of these paths, as it wishes to enhance Iraq’s production capabilities in the energy sector and have the gas reach Europe to reduce Russian pressure on the continent. This flexibility shown by the administration of President Joe Biden regarding Iran’s frozen funds or financial dues in Iraq and the attempts of both parties to avoid any escalation of the Gaza conflict might be explained by this.
This was indicated by Iraqi Prime Minister Mohammed Shiaa Al-Sudani in his speech at the Peace Summit held recently in Cairo, against the backdrop of Gaza’s developments. He hinted at the danger of what is happening and its implications for global energy supplies and security.
The Biden administration does not want oil prices to rise, given its negative impact on the U.S. economy and inflation, ahead of the upcoming presidential elections. Moreover, escalating tension in Gaza and expanding the war’s scope threaten Biden’s economic projects and his vision of enhancing stability in the region to serve American interests.
The joint projects serve peace in the region
It seems that the Middle East conflict cannot be resolved militarily. It requires a peaceful path that considers the interests of all parties involved. Therefore, economic projects that bring all stakeholders together must be a priority, uniting their views.
In this context, the development road stands out as one of the most important pillars of peace in the region, and the most realistic one that can have a positive impact, requiring its expansion to include other countries that have a deeper role in achieving development and prosperity for the people of the region and the world alike.