What is the story about?
The United States Department of the Treasury and the US Department of State launched a massive sanctions campaign designated as "Operation Economic Outcast" on Monday.
Aimed at severing the Iranian regime's global financial lifelines, the action targets Tehran’s petroleum, petrochemical, shipping, digital asset, and military procurement networks.
In a direct blow to Indian commercial channels, the US government explicitly named and sanctioned four India-based companies and an Indian national alongside dozens of international intermediaries.
The sweep marks one of the most aggressive enforcement actions undertaken by Washington this year.
Announced by US Treasury Secretary Scott Bessent, Operation Economic Outcast represents a comprehensive economic offensive designed to deny the Islamic Revolutionary Guard Corps (IRGC) and the Iranian government
access to international capital markets and foreign currency.
The US Treasury’s Office of Foreign Assets Control (OFAC) and the US State Department designated nearly 60 entities, individuals, and ocean-going vessels spanning multiple jurisdictions, including India, Singapore, the United Arab Emirates (UAE), and Switzerland.
According to US officials, the crackdown targets five primary financial and logistics vectors which are petroleum and petrochemical exports, illicit shipping networks, digital asset exchanges, gold trading, and dual-use technology procurement.
Bessent highlighted that the US is establishing a strict enforcement timeline for international partner nations to shut down identified Iranian financial backchannels or face immediate secondary sanctions.
The announcement sent shockwaves through Iran's domestic economy. On August 24, the Iranian rial plummeted to a historic low of 2.02 million rials per US dollar, while domestic inflation surged past 66 per cent amidst severe currency depreciation.
In response, Iranian authorities signalled internal security mobilisations while warning foreign states against complying with the US economic campaign.
The most direct consequence for India is the formal inclusion of four Indian commercial firms and an executive in the US Department of the Treasury’s Specially Designated Nationals (SDN) list under Executive Order 13846.
The US State Department alleged that these entities engaged in significant purchase, acquisition, sale, transport, or marketing of Iranian-origin petroleum and petrochemical products.
Portease Partners LLP: Based in India, Portease Partners LLP was designated for allegedly facilitating the import of multiple shipments of Iranian petrochemical products into the Indian domestic market.
Indian national Indrismiya Asharafmiya Shekh, a designated partner in the firm, was individually sanctioned for his role in managing these procurement transactions.
Sadashiva Overseas Limited: Designated for knowingly engaging in major transactions involving Iranian crude and refined products.
US enforcement agencies claim Sadashiva Overseas imported approximately $69 million worth of Iranian-origin petroleum products between February 2024 and June 2025, operating in tandem with previously US-designated trading entities such as Dubai-based Bonjoure Commodity FZE.
PP Softtech Private Limited: Sanctioned for importing an estimated $25 million worth of Iranian petroleum products between January 2024 and June 2025. PP Softtech's director, Indian national Prashant Garg, was also designated by US authorities.
Prakrutees Infra Impex India Private Limited: Identified as a key importer of Iranian energy products valued at $25 million between May 2023 and February 2026, also leveraging offshore networks connected to Bonjoure Commodity FZE.
Parallel actions were taken against major international trading companies that interface with Asian trade hubs. US authorities sanctioned Singapore-headquartered Wellbred Capital alongside its subsidiary trading networks in Dubai and Geneva.
Wellbred was alleged to be part of a vast global shipping and commodity trading empire controlled by Mohammad Hossein Shamkhani, son of the late Iranian security chief Ali Shamkhani.
OFAC noted that Shamkhani’s network operates shadow fleets of tankers and container ships transporting oil, naphtha, and liquefied petroleum gas (LPG) across Asia, generating billions of dollars in off-the-books revenue.
The designation of these Indian companies freezes any assets they hold within US jurisdictions, prohibits US citizens and entities from engaging in transactions with them, and severely restricts their access to the global US dollar-denominated financial system.
Bilateral commercial relations between India and Iran have already undergone a steep contraction over the past seven years. Total trade peaked at nearly $17 billion in Financial Year 2018-19, driven primarily by $13.5 billion in Indian imports — of which $12.4 billion consisted of Iranian crude oil.
Following the end of US sanctions waivers in 2019, India halted regular crude purchases from Tehran, causing bilateral trade to collapse by over 90 percent.
By Financial Year 2025-26, Indian exports to Iran had shrivelled to approximately $1.2 billion, while Indian imports from Iran totalled less than $375 million.
India’s non-oil imports from Iran currently consist largely of low-value agricultural and industrial raw materials, including bitumen ($138 million), fresh apples ($41 million), almonds ($36 million), and dates ($35 million).
Despite this reduced trade volume, the aggressive rollout of Operation Economic Outcast threatens to cripple key Indian agricultural and pharmaceutical export sectors that rely on Iran as a high-volume destination.
The basmati rice crisis
Iran represents one of the largest overseas markets for premium Indian long-grained basmati rice. In the first six months of this year alone, Indian exporters shipped $383.11 million worth of rice to Iranian buyers.
The expansion of US sanctions creates immediate payment settlement bottlenecks for Indian millers and trading houses in northern agricultural belts such as Punjab, Haryana, and Western Uttar Pradesh.
Exporters fear that heightened compliance friction, freezing of correspondent banking channels, and potential secondary sanctions on shipping lines will paralyse rice shipments during the upcoming autumn harvest season, leading to domestic supply gluts and falling farm-gate prices.
Tea exports under severe strain
Indian tea exports to Iran recorded $14.34 million in the first half of 2026. Industry leaders and tea planter associations in Assam and West Bengal have expressed acute concern over payment realisation.
Because a substantial portion of Indian tea destined for Tehran is processed and re-exported via intermediary merchants in the United Arab Emirates, newly instituted UAE trade restrictions coupled with US financial monitorings threaten to freeze these payment corridors entirely.
Pharmaceuticals and essential supplies
While medical equipment, pharmaceuticals, and agricultural foodstuffs are formally exempt from US sanctions under humanitarian provisions, practical execution has become increasingly difficult.
Global and Indian commercial banks routinely engage in "over-compliance" — refusing to process legitimate letters of credit or trade documentation linked to Iranian ports or buyers out of fear of incurring US regulatory penalties.
Consequently, Indian pharmaceutical exporters are facing payment delays and heightened insurance premiums on shipments bound for Iranian ports.
A critical vulnerability for India's trade with Iran lies in the transshipment networks of the Persian Gulf.
Over recent years, as direct banking channels between Mumbai and Tehran became unviable under primary US sanctions, Indian businesses increasingly relied on Dubai-based trading companies, free-zone entities, and re-export channels to conduct trade.
US' Operation Economic Outcast directly targets this intermediary architecture. US authorities have put secondary financial institutions across the UAE, Oman, and South Asia on notice.
The UAE government's recent decision to tighten compliance and suspend several high-risk re-export corridors to Tehran has also effectively severed the safety valve that Indian exporters relied upon.
Payment mechanisms have also entered a state of acute uncertainty:
Rupee-Rial mechanism paralysis: The rupee-rial trade mechanism, established under sovereign agreements to allow Indian banks (such as UCO Bank) to settle trade using rupees deposited by India for historic oil imports, has largely exhausted its surplus reserves.
Without fresh Indian oil purchases to replenish rupee balances in Indian bank accounts, Iranian buyers lack the rupee liquidity required to pay for incoming consignments of Indian basmati rice and tea.
Third-party clearing risks: Indian exporters who attempted to utilise third-party currency exchanges or regional financial houses now face severe risk under US designations targeting Iranian digital asset exchanges, hawala networks, and non-compliant foreign banks.
Maritime insurance & freight choking: Indian exporters are finding it difficult to secure shipping lines willing to call at Iranian ports such as Bandar Abbas.
European and Asian shipping lines, along with marine underwriters, are withdrawing coverage for vessels entering Iranian territorial waters to avoid violating US shipping and port sector prohibitions.
Parallel to the entity sanctions, the US Treasury’s Office of Foreign Assets Control issued a explicit Maritime Alert on August 24, warning global shipping lines against complying with Iranian demands for "safe passage tolls" in the Strait of Hormuz.
In recent months, Iranian authorities and the designated "Persian Gulf Strait Authority" (PGSA)
have demanded toll payments, informal swaps, digital asset transfers, or insurance registrations with the Persian Gulf Marine Insurance Company (PGMIC) from merchant vessels navigating the international strait.
OFAC’s updated alert explicitly warns US and non-US shipowners, charterers, insurers, and financial institutions that paying any fees, tolls, or acquiring insurance coverage from PGSA or PGMIC constitutes a direct violation of US counterterrorism and nonproliferation sanctions.
Non-US shipping companies that make these payments risk severe secondary sanctions, asset freezes, and exclusion from US financial markets.
This places Indian maritime commerce in a perilous dilemma as approximately 40 per cent of India’s crude oil imports and a massive volume of its containerised trade transit through the Strait of Hormuz.
If Indian-flagged or Indian-chartered vessels refuse to pay tolls to Iranian authorities in compliance with US warnings, they face potential detention, boarding, or physical harassment by IRGC naval forces controlling the waterway.
Conversely, if Indian shipowners or freight forwarders pay transit fees to secure unhindered passage through the Strait, they risk being designated by OFAC, losing global protection, and forfeiting reinsurance coverage from International Group P&I Clubs.
This maritime legal catch-22 significantly elevates freight rates, war-risk insurance premiums, and operational risk for all Indian merchant trade operating in the Persian Gulf.
From a direct procurement standpoint, India’s immediate exposure to Iranian crude oil is minimal.
Following the expiration of US SRE (Significant Reduction Exceptions) waivers in 2019, state-run refiners — including Indian Oil Corporation (IOCL), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL) — eliminated Iranian crude from their term contracts.
While Indian refiners occasionally purchased spot cargoes of Iranian heavy crude during temporary market windows, no fresh crude shipments have been loaded for India in recent months.
Instead, India successfully diversified its crude import basket, leaning heavily on discounted Russian crude alongside traditional supplies from Saudi Arabia, Iraq, the UAE, and the United States.
However, the macroeconomic threat to India stems from the indirect impact of US sanctions on global oil prices and market tightness.
The China factor: China remains the primary global buyer of Iranian crude oil, importing over 1.2 to 1.5 million barrels per day through independent "teapot" refineries via shadow fleet tankers.
If US enforcement under Operation Economic Outcast succeeds in choking off Chinese imports of Iranian oil through secondary sanctions on Chinese ports, banks, and refiners, Beijing will be forced to replace those volumes by purchasing crude from alternative spot markets, including West Asian grade and West African crude.
Global price spikes: This sudden surge in global demand for non-sanctioned crude would drive Brent crude prices upward.
Independent trade experts estimate that every $10 per barrel increase in global crude prices expands India's current account deficit (CAD) by roughly $14 billion, pressures the Indian Rupee against the US Dollar, and fuels domestic retail inflation through higher transport and logistics costs.
Legislative overhang in Washington: Compounding these market dynamics is the legislative threat posed by the "Sanctioning Russia and Iran Act of 2026," which passed the US Senate on August 7 earlier this month.
If signed into law, the legislation would mandate secondary tariffs of up to 100 per cent on goods imported into the US from nations that continue purchasing significant volumes of sanctioned Russian or Iranian energy.
This creates a high-stakes policy environment for New Delhi as it balances its energy imports from Moscow with its broader trade relationship with Washington.
Beyond direct merchandise trade, US sanctions on Iran cast a long shadow over India’s infrastructure initiatives in Eurasia, primarily the Shahid Beheshti Terminal at Chabahar Port and the International North-South Transport Corridor (INSTC).
Chabahar Port constraints
In May 2024, India signed a landmark 10-year long-term contract with Iran’s Port and Maritime Organisation (PMO) to equip and operate the Shahid Beheshti terminal at Chabahar Port through India Ports Global Limited (IPGL).
Chabahar serves as India's primary strategic gateway to bypass Pakistan and access landlocked Afghanistan and Central Asian markets.
While Chabahar Port previously enjoyed a specific US sanctions carve-out under the South Asia Strategy (owing to its role in humanitarian aid delivery to Afghanistan), the aggressive stance of Operation Economic Outcast creates severe operational headwinds:
Delays to the INSTC Corridor
The International North-South Transport Corridor — a 7,200-kilometre multi-modal transit network meant to connect Mumbai to Saint Petersburg via Iran and the Caspian Sea — relies fundamentally on seamless rail, road, and port transit through Iranian territory.
Heightened US secondary sanctions complicate logistics integration, border customs clearing software, freight forwarding contracts, and railway funding for key missing links, such as the Rasht-Astara railway section in northern Iran.
As US scrutiny heats up over any financial interactions with Iranian state transit agencies, Indian logistics firms are forced to proceed with extreme caution, delaying the realisation of a faster, cheaper trade route to Russia and Central Asia.
The recent US announcement leaves India navigating a tricky landscape.
While New Delhi has historically maintained that it abides only by United Nations-mandated sanctions rather than unilateral secondary measures, Indian commercial banks, refiners, and private exporters operate with heavy exposure to the Western financial system and must strictly limit their legal vulnerability.
To mitigate the economic fallout, India’s Ministry of Commerce and Industry and Ministry of External Affairs are expected to pursue a multi-pronged strategy.
1. Diplomatic engagement for project clarity: New Delhi will likely seek formal diplomatic discussions with the US State Department and US Treasury to re-confirm specific exemptions for strategic projects such as Chabahar Port, pointing out its critical role in humanitarian supply chains and regional stability.
2. Restructuring agricultural trade corridors: Trade bodies representing basmati rice and tea exporters are urging the Indian government to establish direct, non-dollar sovereign payment mechanisms or expand special Vostro rupee accounts with non-sanctioned Indian state banks to bypass transshipment dependencies in Dubai.
3. Enhanced sanctions compliance guidelines: The Ministry of Commerce is expected to issue updated compliance advisories for Indian small and medium-sized enterprises (SMEs) to prevent inadvertent dealings with SDN-listed entities, unvetted shadow-fleet tankers, or Iranian front companies.
4. Market diversification: In response to heightened risks in the Iranian market, Indian export promotion councils are moving to accelerate trade outreach in alternative destinations across West Africa, West Asia, and Central Asia to absorb potential surpluses of agricultural commodities.
With inputs from agencies
Aimed at severing the Iranian regime's global financial lifelines, the action targets Tehran’s petroleum, petrochemical, shipping, digital asset, and military procurement networks.
In a direct blow to Indian commercial channels, the US government explicitly named and sanctioned four India-based companies and an Indian national alongside dozens of international intermediaries.
The sweep marks one of the most aggressive enforcement actions undertaken by Washington this year.
What is 'Operation Economic Outcast'?
Announced by US Treasury Secretary Scott Bessent, Operation Economic Outcast represents a comprehensive economic offensive designed to deny the Islamic Revolutionary Guard Corps (IRGC) and the Iranian government
The US Treasury’s Office of Foreign Assets Control (OFAC) and the US State Department designated nearly 60 entities, individuals, and ocean-going vessels spanning multiple jurisdictions, including India, Singapore, the United Arab Emirates (UAE), and Switzerland.
According to US officials, the crackdown targets five primary financial and logistics vectors which are petroleum and petrochemical exports, illicit shipping networks, digital asset exchanges, gold trading, and dual-use technology procurement.
Bessent highlighted that the US is establishing a strict enforcement timeline for international partner nations to shut down identified Iranian financial backchannels or face immediate secondary sanctions.
The announcement sent shockwaves through Iran's domestic economy. On August 24, the Iranian rial plummeted to a historic low of 2.02 million rials per US dollar, while domestic inflation surged past 66 per cent amidst severe currency depreciation.
In response, Iranian authorities signalled internal security mobilisations while warning foreign states against complying with the US economic campaign.
Have India-linked firms also been sanctioned?
The most direct consequence for India is the formal inclusion of four Indian commercial firms and an executive in the US Department of the Treasury’s Specially Designated Nationals (SDN) list under Executive Order 13846.
The US State Department alleged that these entities engaged in significant purchase, acquisition, sale, transport, or marketing of Iranian-origin petroleum and petrochemical products.
Portease Partners LLP: Based in India, Portease Partners LLP was designated for allegedly facilitating the import of multiple shipments of Iranian petrochemical products into the Indian domestic market.
Indian national Indrismiya Asharafmiya Shekh, a designated partner in the firm, was individually sanctioned for his role in managing these procurement transactions.
Sadashiva Overseas Limited: Designated for knowingly engaging in major transactions involving Iranian crude and refined products.
US enforcement agencies claim Sadashiva Overseas imported approximately $69 million worth of Iranian-origin petroleum products between February 2024 and June 2025, operating in tandem with previously US-designated trading entities such as Dubai-based Bonjoure Commodity FZE.
PP Softtech Private Limited: Sanctioned for importing an estimated $25 million worth of Iranian petroleum products between January 2024 and June 2025. PP Softtech's director, Indian national Prashant Garg, was also designated by US authorities.
Prakrutees Infra Impex India Private Limited: Identified as a key importer of Iranian energy products valued at $25 million between May 2023 and February 2026, also leveraging offshore networks connected to Bonjoure Commodity FZE.
Parallel actions were taken against major international trading companies that interface with Asian trade hubs. US authorities sanctioned Singapore-headquartered Wellbred Capital alongside its subsidiary trading networks in Dubai and Geneva.
Wellbred was alleged to be part of a vast global shipping and commodity trading empire controlled by Mohammad Hossein Shamkhani, son of the late Iranian security chief Ali Shamkhani.
OFAC noted that Shamkhani’s network operates shadow fleets of tankers and container ships transporting oil, naphtha, and liquefied petroleum gas (LPG) across Asia, generating billions of dollars in off-the-books revenue.
The designation of these Indian companies freezes any assets they hold within US jurisdictions, prohibits US citizens and entities from engaging in transactions with them, and severely restricts their access to the global US dollar-denominated financial system.
What is the immediate fallout on India-Iran trade?
Bilateral commercial relations between India and Iran have already undergone a steep contraction over the past seven years. Total trade peaked at nearly $17 billion in Financial Year 2018-19, driven primarily by $13.5 billion in Indian imports — of which $12.4 billion consisted of Iranian crude oil.
Following the end of US sanctions waivers in 2019, India halted regular crude purchases from Tehran, causing bilateral trade to collapse by over 90 percent.
By Financial Year 2025-26, Indian exports to Iran had shrivelled to approximately $1.2 billion, while Indian imports from Iran totalled less than $375 million.
India’s non-oil imports from Iran currently consist largely of low-value agricultural and industrial raw materials, including bitumen ($138 million), fresh apples ($41 million), almonds ($36 million), and dates ($35 million).
Despite this reduced trade volume, the aggressive rollout of Operation Economic Outcast threatens to cripple key Indian agricultural and pharmaceutical export sectors that rely on Iran as a high-volume destination.
The basmati rice crisis
Iran represents one of the largest overseas markets for premium Indian long-grained basmati rice. In the first six months of this year alone, Indian exporters shipped $383.11 million worth of rice to Iranian buyers.
The expansion of US sanctions creates immediate payment settlement bottlenecks for Indian millers and trading houses in northern agricultural belts such as Punjab, Haryana, and Western Uttar Pradesh.
Exporters fear that heightened compliance friction, freezing of correspondent banking channels, and potential secondary sanctions on shipping lines will paralyse rice shipments during the upcoming autumn harvest season, leading to domestic supply gluts and falling farm-gate prices.
Tea exports under severe strain
Indian tea exports to Iran recorded $14.34 million in the first half of 2026. Industry leaders and tea planter associations in Assam and West Bengal have expressed acute concern over payment realisation.
Because a substantial portion of Indian tea destined for Tehran is processed and re-exported via intermediary merchants in the United Arab Emirates, newly instituted UAE trade restrictions coupled with US financial monitorings threaten to freeze these payment corridors entirely.
Pharmaceuticals and essential supplies
While medical equipment, pharmaceuticals, and agricultural foodstuffs are formally exempt from US sanctions under humanitarian provisions, practical execution has become increasingly difficult.
Global and Indian commercial banks routinely engage in "over-compliance" — refusing to process legitimate letters of credit or trade documentation linked to Iranian ports or buyers out of fear of incurring US regulatory penalties.
Consequently, Indian pharmaceutical exporters are facing payment delays and heightened insurance premiums on shipments bound for Iranian ports.
How has the larger network bottleneck affected Indian trade?
A critical vulnerability for India's trade with Iran lies in the transshipment networks of the Persian Gulf.
Over recent years, as direct banking channels between Mumbai and Tehran became unviable under primary US sanctions, Indian businesses increasingly relied on Dubai-based trading companies, free-zone entities, and re-export channels to conduct trade.
US' Operation Economic Outcast directly targets this intermediary architecture. US authorities have put secondary financial institutions across the UAE, Oman, and South Asia on notice.
The UAE government's recent decision to tighten compliance and suspend several high-risk re-export corridors to Tehran has also effectively severed the safety valve that Indian exporters relied upon.
Payment mechanisms have also entered a state of acute uncertainty:
Rupee-Rial mechanism paralysis: The rupee-rial trade mechanism, established under sovereign agreements to allow Indian banks (such as UCO Bank) to settle trade using rupees deposited by India for historic oil imports, has largely exhausted its surplus reserves.
Without fresh Indian oil purchases to replenish rupee balances in Indian bank accounts, Iranian buyers lack the rupee liquidity required to pay for incoming consignments of Indian basmati rice and tea.
Third-party clearing risks: Indian exporters who attempted to utilise third-party currency exchanges or regional financial houses now face severe risk under US designations targeting Iranian digital asset exchanges, hawala networks, and non-compliant foreign banks.
Maritime insurance & freight choking: Indian exporters are finding it difficult to secure shipping lines willing to call at Iranian ports such as Bandar Abbas.
European and Asian shipping lines, along with marine underwriters, are withdrawing coverage for vessels entering Iranian territorial waters to avoid violating US shipping and port sector prohibitions.
How is the Strait of Hormuz chokepoint faring for India?
Parallel to the entity sanctions, the US Treasury’s Office of Foreign Assets Control issued a explicit Maritime Alert on August 24, warning global shipping lines against complying with Iranian demands for "safe passage tolls" in the Strait of Hormuz.
In recent months, Iranian authorities and the designated "Persian Gulf Strait Authority" (PGSA)
OFAC’s updated alert explicitly warns US and non-US shipowners, charterers, insurers, and financial institutions that paying any fees, tolls, or acquiring insurance coverage from PGSA or PGMIC constitutes a direct violation of US counterterrorism and nonproliferation sanctions.
Non-US shipping companies that make these payments risk severe secondary sanctions, asset freezes, and exclusion from US financial markets.
This places Indian maritime commerce in a perilous dilemma as approximately 40 per cent of India’s crude oil imports and a massive volume of its containerised trade transit through the Strait of Hormuz.
If Indian-flagged or Indian-chartered vessels refuse to pay tolls to Iranian authorities in compliance with US warnings, they face potential detention, boarding, or physical harassment by IRGC naval forces controlling the waterway.
Conversely, if Indian shipowners or freight forwarders pay transit fees to secure unhindered passage through the Strait, they risk being designated by OFAC, losing global protection, and forfeiting reinsurance coverage from International Group P&I Clubs.
This maritime legal catch-22 significantly elevates freight rates, war-risk insurance premiums, and operational risk for all Indian merchant trade operating in the Persian Gulf.
Is India dependent on Iranian crude oil?
From a direct procurement standpoint, India’s immediate exposure to Iranian crude oil is minimal.
Following the expiration of US SRE (Significant Reduction Exceptions) waivers in 2019, state-run refiners — including Indian Oil Corporation (IOCL), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL) — eliminated Iranian crude from their term contracts.
While Indian refiners occasionally purchased spot cargoes of Iranian heavy crude during temporary market windows, no fresh crude shipments have been loaded for India in recent months.
Instead, India successfully diversified its crude import basket, leaning heavily on discounted Russian crude alongside traditional supplies from Saudi Arabia, Iraq, the UAE, and the United States.
However, the macroeconomic threat to India stems from the indirect impact of US sanctions on global oil prices and market tightness.
The China factor: China remains the primary global buyer of Iranian crude oil, importing over 1.2 to 1.5 million barrels per day through independent "teapot" refineries via shadow fleet tankers.
If US enforcement under Operation Economic Outcast succeeds in choking off Chinese imports of Iranian oil through secondary sanctions on Chinese ports, banks, and refiners, Beijing will be forced to replace those volumes by purchasing crude from alternative spot markets, including West Asian grade and West African crude.
Global price spikes: This sudden surge in global demand for non-sanctioned crude would drive Brent crude prices upward.
Independent trade experts estimate that every $10 per barrel increase in global crude prices expands India's current account deficit (CAD) by roughly $14 billion, pressures the Indian Rupee against the US Dollar, and fuels domestic retail inflation through higher transport and logistics costs.
Legislative overhang in Washington: Compounding these market dynamics is the legislative threat posed by the "Sanctioning Russia and Iran Act of 2026," which passed the US Senate on August 7 earlier this month.
If signed into law, the legislation would mandate secondary tariffs of up to 100 per cent on goods imported into the US from nations that continue purchasing significant volumes of sanctioned Russian or Iranian energy.
This creates a high-stakes policy environment for New Delhi as it balances its energy imports from Moscow with its broader trade relationship with Washington.
How could India's Chabahar and INSTC plans be hit?
Beyond direct merchandise trade, US sanctions on Iran cast a long shadow over India’s infrastructure initiatives in Eurasia, primarily the Shahid Beheshti Terminal at Chabahar Port and the International North-South Transport Corridor (INSTC).
Chabahar Port constraints
In May 2024, India signed a landmark 10-year long-term contract with Iran’s Port and Maritime Organisation (PMO) to equip and operate the Shahid Beheshti terminal at Chabahar Port through India Ports Global Limited (IPGL).
Chabahar serves as India's primary strategic gateway to bypass Pakistan and access landlocked Afghanistan and Central Asian markets.
While Chabahar Port previously enjoyed a specific US sanctions carve-out under the South Asia Strategy (owing to its role in humanitarian aid delivery to Afghanistan), the aggressive stance of Operation Economic Outcast creates severe operational headwinds:
- IPGL faces immense challenges in procuring gantry cranes, container handling equipment, and specialised port machinery from global European or East Asian manufacturers, as suppliers fear secondary US enforcement for delivering heavy equipment to Iranian ports.
- Financial institutions are reluctant to process fee payments, terminal handling charges, or capital injections required for Chabahar’s expansion.
- Major global shipping lines remain hesitant to schedule regular feeder calls at Chabahar, preferring non-sanctioned regional ports like Jebel Ali or Sohar.
Delays to the INSTC Corridor
The International North-South Transport Corridor — a 7,200-kilometre multi-modal transit network meant to connect Mumbai to Saint Petersburg via Iran and the Caspian Sea — relies fundamentally on seamless rail, road, and port transit through Iranian territory.
Heightened US secondary sanctions complicate logistics integration, border customs clearing software, freight forwarding contracts, and railway funding for key missing links, such as the Rasht-Astara railway section in northern Iran.
As US scrutiny heats up over any financial interactions with Iranian state transit agencies, Indian logistics firms are forced to proceed with extreme caution, delaying the realisation of a faster, cheaper trade route to Russia and Central Asia.
How is New Delhi expected to respond?
The recent US announcement leaves India navigating a tricky landscape.
While New Delhi has historically maintained that it abides only by United Nations-mandated sanctions rather than unilateral secondary measures, Indian commercial banks, refiners, and private exporters operate with heavy exposure to the Western financial system and must strictly limit their legal vulnerability.
To mitigate the economic fallout, India’s Ministry of Commerce and Industry and Ministry of External Affairs are expected to pursue a multi-pronged strategy.
1. Diplomatic engagement for project clarity: New Delhi will likely seek formal diplomatic discussions with the US State Department and US Treasury to re-confirm specific exemptions for strategic projects such as Chabahar Port, pointing out its critical role in humanitarian supply chains and regional stability.
2. Restructuring agricultural trade corridors: Trade bodies representing basmati rice and tea exporters are urging the Indian government to establish direct, non-dollar sovereign payment mechanisms or expand special Vostro rupee accounts with non-sanctioned Indian state banks to bypass transshipment dependencies in Dubai.
3. Enhanced sanctions compliance guidelines: The Ministry of Commerce is expected to issue updated compliance advisories for Indian small and medium-sized enterprises (SMEs) to prevent inadvertent dealings with SDN-listed entities, unvetted shadow-fleet tankers, or Iranian front companies.
4. Market diversification: In response to heightened risks in the Iranian market, Indian export promotion councils are moving to accelerate trade outreach in alternative destinations across West Africa, West Asia, and Central Asia to absorb potential surpluses of agricultural commodities.
With inputs from agencies
