‘A real big deal’: Biden backs economic corridor as shifting geopolitical alliances fragment the global economy

NEW
DELHI
—
Even
for
those
accustomed
to
the
ebbs
and
flows
of
the
U.S.-Saudi
Arabia
relationship,
the
sight
of
President
Joe
Biden
extending
a
handshake
to
Saudi
Crown
Prince
Mohammad
bin
Salman
at
the
recent
G20
leaders’
summit
in
New
Delhi
was
quite
the
turnaround.

After
all,
Biden
had
warned
last
October
of
“consequences”
after
the
Saudi-led
oil
cartel
OPEC
decided
to
cut
crude
production
and
boost
prices
amid
Russia’s
war
in
Ukraine.

Roughly
a
year
on,
Saudi
Arabia
is
not
only
one
of

six
new
invitees
to
the
China-dominated
BRICS
coalition,
but
also
a
signatory
to
the
Biden-led
pact
for
a

ship-to-rail
economic
corridor
linking
India
with
Middle
Eastern
and
European
Union
countries

unveiled
on
the
sidelines
of
the
G20
summit
—
framed
as
a
counter
to
China’s
decade-old
Belt
and
Road
Initiative.

Saudi
Arabia’s
double
dipping
underscores
the
range
of
economic
and
strategic
opportunities
that
abound
for
the
various
economies
caught
between
the
dueling
U.S.
and
China
as
they
build
their
own
alliances
and
spheres
of
influence.
U.S.
and
other
major
Western
nations
have
been
keen
to
“de-risk”
their
economic
—
and
not
decouple
—
from
China
on
grounds
of
national
security.

This
is
also
consequently
leading
to
a
fragmentation
of
the
world’s
economy
as
protectionism
and
nationalism
impede
global
trade,
while
giving
rise
to
a
complex
matrix
of
relationships
in
a
multipolar
world
that
are
not
always
straightforward
as
nations
pursue
their
self
interests.

“We
aren’t
heading
toward
a
BRICS
vs
G7
world,”
Ian
Bremmer,
founder
and
president
of
political
risk
consultancy
Eurasia
Group,
wrote
in
a
note
last
Monday.
G7
refers
to
the
Group
of
Seven
advanced
industrialized
economies,
while
BRICS
refers
to
a
group
of
leading
developing
economies
—
both
are
sub-groups
within
the
G20.

“China
scored
a
significant
victory
at
the
BRICS
summit,
securing
the
invitations
of
six
additional
countries
to
join
the
group
—
despite
significant
concerns
from
Brazil,
India,
and
South
Africa,”
he
said.

“But
almost
all
the
BRICS+
oppose
the
idea
of
a
China-led
organization
and
don’t
want
BRICS
membership
to
constrain
their
existing
—
and
in
most
cases
growing
—
diplomatic
and
economic
ties
with
G7
members,”
Bremmer
said.

In
fact,
the
greater
risk
and
opportunity
cost
may
now
be
from
any
exclusion.

“We
say
there
is
no
corridor
without
Turkey,”
Turkish
President
Recep
Tayyip
Erdoğan

reportedly
told
reporters
on
the
sidelines
of
the
G20
leaders’
summit
in
Delhi
—
after
it
emerged
his
country
was
excluded
from
the
Biden-backed

new
economic
corridor.

The
attraction,
particularly
for
the
world’s
developing
economies,
is
the
promise
of
investment
that
would
plug
infrastructure
gaps
in
low-
and
middle-income
nations.
This
would
in
turn
secure
regional
supply
chains,
boost
trade
connectivity
and
economic
activity
—
all
similar
to
objectives
underpinning
China’s
Belt
and
Road
Initiative,
a
global
infrastructure
investment
strategy
that
Beijing
launched
in
2013.

“The
problem
with
‘counter
(China’s
Belt
and
Road
Initiative)’
is
that
it
is
a
U.S.
narrative,
while
local
narratives
are
nearly
always
about
multiplication/addition,
not
subtraction,”
Evan
Feigenbaum,
a
former
U.S.
diplomat
and
currently
vice-president
for
studies
at
the
Carnegie
Endowment
for
International
Peace,

said
on
X,
formerly
Twitter.

This
Biden-led
initiative
will
comprise
of
two
separate
corridors,
the
east
corridor
connecting
India
to
the
Middle
East
and
the
northern
corridor
connecting
the
Middle
East
to
Europe.
It
will
include
a
railway
that
will
supplement
existing
cross-border
maritime
and
road
transport
routes
between
India,
the
UAE,
Saudi
Arabia,
Jordan,
Israel,
and
Europe.

“This
is
a
big
deal.
This
is
a
real
big
deal,”

Biden
said
in
Delhi
at
the
launch.

Biden
also
announced
a
partnership
with
the
European
Union
in a
new
greenfield
rail
line
expansion to
develop
the
Lobito
Corridor
connecting
the
southern
part
of
the
Democratic
Republic
of
the
Congo
and
northwestern
Zambia
to
regional
and
global
trade
markets
via
the
port
of
Lobito
in
Angola.

China’s
BRI
offers
a
glimpse
into
Biden’s
ambition
and
perhaps
what
his
infrastructure
pact
will
come
up
against.

Since
its
launch
10
years
ago,
Beijing’s
BRI
now
counts
148
countries
as
partners,
according
to
a

tally
by
Fudan
University
in
Shanghai.
The
BRI
is
likely
to
boost
world
GDP
by
$7.1
trillion
per
annum
by
2040,
according
to

a
2019
study
by
the
independent
Center
for
Economics
and
Business
Research
in
London.

The
value
of
acquisitions
and
investments
by
Gulf
companies
in
China
in
on
track
for
its
best
ever,
having
already
climbed
more
than
1,000%
year-on-year
to
$5.3
billion,

according
to
data
compiled
by
Bloomberg.

China’s
growing
involvement
in
political
and
security
issues
is
testament
of
this
growing
clout
with
its
Gulf
partners.
The
Saudi-Iran
normalization
agreement,
for
example,
was
brokered
in
Beijing.

Biden’s
infrastructure
pact
cutting
through
the
heart
of
the
Middle
East
is
one
way
the
U.S.
is
attempting
to
reboot
its
influence
in
the
region
again.

Even
then,
China’s
10-year
head
start
offers
some
cautionary
lessons
for
Biden’s
global
infrastructure
pact.

BRI
deals
between
China
and
various
partner
countries
typically
involve
a
set
of
loans
either
with
multilateral
banks,
that
Beijing
exerts
heavy
influence
on,
or
with
Chinese
state
or
policy
banks

at
about
4-5%
interest
rates
—
which
is
typically
higher
than
the
IMF,
where
loans
are
sometimes
extended
to
low-income
countries

at
zero
percent.

BRI
deals
also
usually
include
construction
and
equipment
by
Chinese
companies,
which
are
mostly
state-owned.

“Debt
issues
aside,
large-scale
infrastructure
projects
tend
to
be
high
risk.
Moreover,
returns
tend
to
get
realized
in
the
longer
term
and
may
not
even
accrue
to
the
original
investor,”
said
Chong
Ja
Ian,
an
associate
professor
in
political
science
at
the
National
University
of
Singapore.

“Hence,
it
is
usually
public
monies
that
fund
large-scale
infrastructure,
since
they
make
less
commercial
sense
for
private
firms
concerned
with
profits
as
well
as
quarterly
or
even
annual
results,”
he
added.
“This
is
especially
the
case
for
the
projects
the
PRC
[People’s
Republic
of
China]
invested
in
as
part
of
the
BRI.
The
lack
of
investment
previously
had
to
do
with
weak
commercial
cases
for
investment.”

According
to
New
York-based
consultancy
Rhodium
Group,
about

$78.5
billion
of
loans
issued
by
Chinese
institutions
to
fund
infrastructure
projects
around
the
world
were
renegotiated
or
written
off
between
2020
and
the
end
of
March
this
year.

The
International
Monetary
Fund
and
the
World
Bank
have
been
involved
in
some
of
these
negotiations,
pointing
to

a
marginal
shift
to
China’s
willingness
to
involve
multilateral
banks
in
debt
restructuring
negotiations.

“25%
of
debt
of
emerging
markets
is
treading
in
distressed
territory,”
IMF’s
Managing
Director
Kristalina
Georgieva
told
CNBC
on
the
sidelines
of
the
Delhi
G20
leaders’
summit.

The
issue
has
gotten
serious
enough
that
U.S.
Treasury
Secretary
Janet
Yellen
ranked
it
high
on
her
agenda
with
her
Chinese
counterparts
on
her
visit
to
Beijing
in
July
and
again
at

this
G20
meeting
in
Delhi.

“I
guess
you
can
say
that
Washington
and
Delhi
are
trying
to
present
an
alternative,”
Chong
said.

“The
corridor
seems
more
focused
on
linking
existing
ports
and
railway
lines,
supplemented
by
energy
grids
and
telecommunications
cables,”
he
added.
“This
appears
to
be
a
lower
risk
approach
and
may
even
make
use
of
infrastructure
already
paid
for
and
built
under
the
auspices
of
the
BRI.”

More
details
of
Biden’s
India-Middle
East-Europe
infrastructure
plan
will
be
made
available
after
participating
countries
meet,
but
his
plan
is
already
seen
as
a
smart
maneuver
around
the
increasingly
nationalistic
sentiment
that
is
limiting
more
trade
liberalization
in
the
U.S.

“Many
states
would
like
access
to
the
U.S.
market,
but
U.S.
domestic
politics
seems
to
make
such
developments
more
difficult
at
the
present
time,”
Chong,
the
NUS
associate
professor,
said.

“Stressing
connectivity
and
investment
is
a
way
for
the
United
States
to
overcome
the
challenges
it
currently
faces
domestically
with
trade
liberalization,”
he
added.

In
the
meantime,
Biden’s
workaround
and
building
of
a
coalition
of
allies
are
giving
India
Prime
Minister
Narendra
Modi
the
room
to
fashion
itself
as
the
leader
of
the
developing
world,
choosing
the
term
“Global
South”
as
his
choice
reference.

In
a
banner
year
for
Indian
diplomacy
that
also
saw
the
world’s
most
populous
nation
take
on
the
rotating
presidency
of Shanghai
Cooperation
Organization,
Modi
took
the
opportunity
to

turn
the
normally
sedate
rotating
G20
presidency
into
a
branding
vehicle
to
burnish
India
as
a
key
global
player
advocating
the
interests
of
the
Global
South,
while
serving
as
an
interlocutor
with
the
developed
nations.

“In
part
that’s
a
response
to
most
countries
in
[G20]
being
upset
at
the
United
States
(and
to
varying
degrees,
the
broader
West)
over
unilateralism
and
lack
of
equity
in
policy
in
the
economic,
pandemic,
climate,
and
security
spheres,”
Eurasia
Group’s
Bremmer
said.

He
added
many
nations
are
also
upset
with
China
over
“diminished
expectations
in
Belt
and
Road
and
an
overly
transactional
and
aggressive
approach
toward
commercial
leverage.”

The
unexpected
consensus
at
the
G20
leaders’
summit,
along
with
Modi
co-fronting
the
launch
of
Biden’s
global
infrastructure
initiative
in
Delhi,
underscore
the
growing
partnership
between
India
and
the
U.S.
in
the
latter’s
broader
Indo-Pacific
strategy
to
contain
China.

Yet
despite
the
overt
calls
toward
“One
Earth,
One
Family,
One
Future”
at
the
Delhi
summit,
the
reality
is
a
more
fragmented
one
as
supply
chains
are
aligning
along
shifting
global
geopolitical
lines
—
when
the
desired
outcome
for
greater
prosperity
for
all
would
involve
a
greater
collaboration.

“In
a
world
where
we
learned
from
Covid
and
the
[Ukraine]
war,
that
supply
chains
need
to
be
reinforced,
they
need
to
be
diversified,
that
connectivity
matters
tremendously,”
IMF’s
Georgieva
told
CNBC.

“What
is
important
is
to
do
it
for
the
benefit
of
everybody,
and
not
for
exclusion
of
others,”
she
said.
“In
that
sense,
I
would
encourage
all
countries
working
collaboratively
with
each
other
to
do
so
in
the
spirit
of
integrated
economy.”