India–EU Connectivity Partnership (2021): An Alternative to BRI

India–EU Connectivity Partnership (2021): An Alternative to BRI

Policy Update
Ashutosh Shukla

Background 

The India-Europe Connectivity Partnership is a flagship program launched in 2021, marking a strategic collaboration between India and Europe. The partnership aims to connect India and Europe through transparency, inclusivity, and sustainability in response to the gap between global infrastructure and connectivity. The foundation of the alliance is based on values of democracy, human rights and the rule of law.  The partnership focuses on cooperation in transport, energy, and people-to-people ties. This partnership will not only benefit India but also other various actors of Africa, Central Asia and the Indo-Pacific region. 

The India-EU summit of 2021 has had an impact on this program, which was designed to interconnect India and Europe’s demand for infrastructure and connectivity with major cities of both nations. It emerges at a critical juncture, with global infrastructure demand estimated at 1.3 trillion euros annually. The Belt and Road Initiative has engaged around 147 countries and has dealt with the finances of 3000 projects, but with a drawback of facing the criticism of various nations regarding the debt trap and also for the opacity.

India, where more than 40 per cent of the population will be under the age of 25 by the end of the year 2030, which can utilise the potential in terms of trade with skillset, both India and Europe require investment and strategic partnership in terms of connectivity, as there is a huge need for hard infrastructure regarding connectivity.

Major Functions and Model of the Partnership

India EU- Connectivity has a multi-directional and multi-modal approach which will work through multiple sectors with shared strategic interest, counterbalancing geopolitics, sustainability, connectivity and transparency. It has both components of infrastructure-based connectivity and digital connectivity, but the energy connectivity goal of this makes it different from the BRI, which prioritises the deployment of renewable capacity-based projects connecting both India and Europe, and smart grid systems. 

The European Investment Bank plays a crucial role in strengthening the project. For the transport community, regulatory cooperation between the two nations is important; these partnerships in terms of transport connectivity focus on sustainable mobility, port investment and cold chain infrastructure. This initiative operates within the existing mechanism of dialogue and partnership between India and the EU, which will leverage private sector investment across the EU and India.

The partnership works on the basis of models of governance, financial models, energy connectivity, transport connectivity, and people-to-people links. In terms of governance, an annual political steering committee will be working to review the strategic partnership. Governance is structured around four key groups: digital, transport, energy, and sustainability. Financing the partnership role of EIB is critical.

The financing model for connectivity projects, which will fund the projects vis-à-vis connectivity, is predominantly state-to-state; the bonds issued by both nations and also Rupee-Euro green bonds, are ways to finance the partnership. The major pillars of the partnership are Digital connectivity, which BRI lacks in this digital connectivity. New Marseille to Mumbai cables and the Google-backed Blue-Raman link via the Gulf of Aden would create low-latency routes.

In energy connectivity, 2.15 billion euros from Germany’s KfW (a German state bank ) state grids would help in both India and Europe in terms of energy connectivity, at the same energy connectivity partnership between India. Denmark is lowering the cost below the Rupee 6/KWH for the 5GW of the pilot capacity, with the energy connectivity concerning- Europe connectivity program, the green hydrogen corridors from the state of Gujarat and Tamil Nadu to import terminals in Hamburg, Rotterdam. Vis-à-vis transport connectivity, EIB provides loans of Euro 2.2 billion to finance metro projects in Kanpur, Lucknow, Bangalore, and Pune for 20 years.

Other important factor which is its 2 flagships programs strategically related to connectivity partnership can be an alternative to BRI in future are the IMEC- India Middle East Economic Corridor which have route from Mumbai to Riyad then to Jordanian port Mafraq to Haifa port of Israel ending at Marseille, this strategic route can be a good alternative in terms of trade both sea bound and land bound as all these nations have strategic alignment, having length of 6400km with rail, sea, road and subsea fibre.

The corridor has secured finances of 20 billion dollars from Saudi Arabia, 8 billion dollars from the UAE in sovereign funds, and 2 billion euros from EIB. The early work of this project includes the UAE-Saudi 570 Km standard-gauge rail earthworks. Like BRI, this project will have an economic impact, which is modelled to be 40 per cent cost saving at the same time 30 per cent time saving, which can help secure their economy, resources and finances.

The Second flagship program, which can be an alternative to BRI, is INSTC, which, if implemented well, can be a miracle for Central Asia, Europe, India, Iran, and Russia. The proposed route of the INSTC is from Mumbai to Bandar Abbas (Iran) Arabian Sea, then from Caspian Sea to Astrakhan to Moscow or St Petersburg and also it will include Kazakhstan – Uzbekistani and Turkmenistan also, regarding this corridor Turkmenistan- Iran line was commissioned in 2022 but this corridor has few challenges like sanctions on Iran and Russia.

An Alternative or Another Bluff 

The India-Europe Connectivity Partnership can be an alternative to the BRI only if all these players with an interest cooperate without bias; it can act as a strategic tool for them to counter the prospects of the BRI. BRI is often criticised for its opaque finances and strategic imperatives and debt dependency, BRI also has very limited environmental safeguarding with all these reasons it provides a gap for a different connectivity project which can connect major landmass with transparency and sustainability.

India- Europe Connectivity Partnership majorly focuses on the inclusive development, infrastructure, energy security and connectivity one most important feature of this program is there is no monopoly of single state and it is backed by the mixed financing model with Euro-Rupee, green funds, sovereign funds.

This partnership will leverage Europe’s vast resources, both energy and financial. Most importantly, this partnership of India and Europe strategically bolsters the objectives of India to both diversify and divert its traditional trade route while reducing the dependency of China on various actors by developing the transboundary, more precisely trans trans-regional corridor like IMEC and INSTC, the shared interest of the various actors will be improved. One more important thing is that both INSTC and IMEC would provide low-cost transportation, as there is involvement of various actors.

One thing to notice regarding the Europe Connectivity partnership and these corridors is “Odds of success as an alternative”. As in a geopolitical game, there are always odds of winning and losing, sometimes less, sometimes more, but never equal. BRI have one advantage is that it was the first mover in a corridor, and its rapid execution due to a monopoly and less dependency.

Seeing this as an opportunity, not a threat the India and the EU should navigate this complex landscape of transregional geopolitics. The strong governance, transparency, shared finances, and coordinated diplomacy among major actors involved are essential for the implementation and success of the program, by which it can be a regional contender to China’s BRI as infrastructure diplomacy.

Performance

The partnership, since it is proposed, has gathered major funding around 100 million Euro credit lines and also of green housing, the green energy corridors, which are important components have funding of 2.15 billion Euro this project also includes proposed urban rail projects in various cities been funded around 2.2 billion Euro and also have expanded metro projects under it. The global gateway initiative, which has a proposal that aims to collect funds of up to 300 billion euros by the year 2027, will help reduce infrastructure costs and will help complete the strategic imperatives and goals.

Yet there are hurdles relating to the logistics and regional politics which further include the internal policy divergence of the EU at the same time the instability in the regional specifically in the middle eastern region and the existence of the non-state actors, India’s export to the EU were to 70 billion Euro in the year 2022-2023 but the regional geopolitical challenges both traditional and nontraditional have created issues and slowed down the growth of the corridors such as INSTC and IMEC.

Impact of the Partnership on Various Dimensions 

One of the major impact of this partnership is its strategic alignment of transregional actors and the shared geostrategic and geoeconomic imperatives, this partnership with proposed alternative routes will help in advancing the development of the economic corridors and Indo- European Relation at the same time it can provide a future alternative to BRI in Indo-Pacific as well where South-East and East Asian nations can also engage in such similar projects which will help India and west in terms of countering Chinese influence. This partnership will not only enhance capacity building but also strengthen urban modernisation, opening new routes in terms of energy security, which is a better alternative than BRI in terms of the energy demands of sub-regional and trans-regional actors.

Corridor such as IMEC, which aims to reduce the transit cost by more the 35% and also transit time up to 30% between India, Europe and Middle East, not only this it will generate the employment at mass level and also will open doors for the skilled youth of the included regions to mobilise and contribute and earn money. Beyond the transregional periphery, this partnership is a good example of multilateral and multiparty cooperation with checks and balances on each other, where there are fewer chances of monopoly of trade and access to the infrastructure like BRI, which will bring accountability. It will also surpass the traditional trade routes and Chinese dominance, as the project has components of renewable it will not create as much impact on the environment as BRI does.

Key Challenges and Issues of  the Connectivity Partnership 

Every strategic partnership or project comes up with both pros and cons, where this partnership, along with the corridors, includes the complexity of coordination because of a diverse and complex geopolitical landscape and interests, particularly regarding finances, as the partnership is multistakeholder. To finance IMEC, an estimated $ 3-8 billion per route will be included; apart from this will be high skills and innovation in terms of finance and implementation. 

The challenging regional stability inter inter-state conflicts, and ongoing conflicts can alter the security and longevity of the partnership and also of the routes and corridors, which can be an alternative to BRI. Another challenge can be China already have played first move and also have strong hold in Africa, Middle East, Central Asia which is an advantage to it, being alone as executor can give edge to China in terms of rapid decision making regarding various geopolitical questions and complexities while the India- Europe connectivity can have latency in terms of decision making and also can have capital stack gaps specially In volatile geopolitical landscape.

Way Forward

To implement this strategic partnership involved actors like India- European Union and other major players of Middle East which with India Europe have strategic imperatives in the region need unified financing and governance and also need clearly defined role of each state involved with their specific timelines for smooth implementations of the projects under partnership this will create better sense of responsibility and accountability. As the partnership offers a comprehensive and sustainable alternative for a strategic shift in the game of connectivity and trade routes, the multinational and multisectoral approach can boost the regional ties.

To make the partnership successful, all the actors within respective nations, be it private or public, need to contribute in terms of finance and de-risking mechanisms and branding the projects to get a broader reach to attract substantial investments.  At the same time, the various diplomatic channels and backchannels need to be activated for rapid clearance of the complexities and issues and also need regular dialogues to minimise the geopolitical tension and misunderstandings.

Conclusion

The partnership between India and Europe regarding connectivity and alternative nontraditional trade routes offers a less opaque and more transparent, strategically sustainable and inclusive option and framework as an alternative to BRI. The partnership, which is transregional in nature, has more and better involvement of multilateral actors and multisectoral cooperation, with less monopoly in terms of contribution, distribution and control. The odds of the success of the partnership and of strategic corridors will depend on the distributive governance, strong geopolitical will, and better coordination among all the stakeholders involved. The partnership in future has the potential to become an alternative to the BRI with its strategic imperatives and also of reshaping the traditional trade routes and transregional connectivity, which can support more balanced infrastructure and financing for the key players such as India, Europe and extended partners.

References

About Author: Ashutosh Shukla is a Research Intern at IMPRI, with a Master’s in International Relations and Strategic Studies from the University of Mumbai. His research interests include foreign policy, diplomacy, and International Relations.

Acknowledgement: The author extends his sincere gratitude to the IMPRI team, Ms. Aasthaba Jadeja and Bhaktiba Jadeja for their invaluable guidance throughout the process.

Disclaimer: All views expressed in the article belong solely to the author and not necessarily to the organisation.

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