The recent US sanctions on Iran are comprehensive and target various sectors and activities, including primary sanctions that prohibit US persons from engaging in transactions with Iran and secondary sanctions that restrict non-US persons from engaging in certain dealings.
The recent US sanctions on Iran are comprehensive and target various sectors and activities, including primary sanctions that prohibit US persons from engaging in transactions with Iran and secondary sanctions that restrict non-US persons from engaging in certain dealings.
The sanctions also include the Specially Designated Nationals List, which blocks the assets of individuals and entities and prohibits US persons from dealing with them.
On May 8, the US Department of the Treasury's Office of Foreign Assets Control imposed new sanctions targeting Iran's oil exports, focusing on the "teapot" refinery Hebei Xinhai Chemical Group Co. and three port terminal operators in China's Shandong Province. The issue revolves around facilitating hundreds of millions of dollars' worth of Iranian oil purchases. OFAC is also sanctioning multiple companies and individuals linked to Iran's "shadow fleet" and two Indian captains for their roles in navigating sanctioned vessels that moved Iranian oil in violation of US restrictions.
The latest developments also include targeting Iran's nuclear programme, oil sector, weapons procurement network and transnational criminal organisations. These actions aim to disrupt Iran's ability to develop nuclear weapons, exert economic pressure and hinder Iran's ability to export oil, especially to major buyers like China.
The sanctions also target entities involved in the transportation and processing of Iranian oil, aiming to disrupt Iran's oil revenue streams, which are alleged to finance terrorism and the development of nuclear weapons.
This results in significant implications for Indian companies, especially those involved in trade, investment, and energy cooperation with Iran.
Energy, Oil Trade
Iran used to be a major oil supplier to India. However, US sanctions limited India's ability to import Iranian crude oil. The recent sanctions aim to target companies, vessels as well as two Indian nationals serving as master on vessels involved in the shipping of Iranian crude oil.
The message is clear: any Indian companies and/or individuals involved in the Iranian petroleum sector are at risk of findings themselves at the receiving end of US sanctions.
Financial Transactions, Banking
Due to US sanctions, Iran's access to the global financial system is restricted. Indian companies dealing with Iran might find it difficult to process payments or make transactions:
Asset Freezes: Any assets owned by sanctioned Indian entities within the United States jurisdiction are frozen.
Banking restrictions: Indian banks could face difficulties in processing payments for goods and services with Iran, as they risk being penalised under US secondary sanctions for facilitating trade with Iran.
Indian companies may need to explore non-dollar payment systems or use intermediaries, which can complicate transactions and increase the cost of doing business. Non-US entities face a risk of getting sanctioned should they be dealing with sanctioned entities.
Export/Import Of Non-Oil Goods
Sanctions also target a wide range of sectors, including the export of non-oil goods, such as machinery, pharmaceuticals and food products. Indian companies exporting to Iran may face:
Supply-chain disruptions: Increased regulatory oversight or restrictions on exports might disrupt Indian exports to Iran, impacting companies that depend on the Iranian market.
Limited access to certain markets: Indian businesses in sectors like telecom, auto parts and construction may see a reduction in demand for their products in Iran due to sanctions limiting the flow of goods.
Also Read: 'Abeyance' For Termination Of Indus Water Treaty? Some Lessons From The History Of Treaty Practice
Impact On Indian Businesses With Presence In Iran
Some Indian companies, such as Indian Oil Corp., ONGC Videsh and other public and private enterprises, have had operations or investments in Iran. Sanctions can put these investments at risk:
Disinvestment or scaling back operations: Companies with stakes in Iranian oil and gas projects may face pressure to scale down their operations, sell off assets, or reconsider long-term investments due to the risk of sanctions. Indian firms could face legal action from the US government or the possibility of fines for continuing business with Iranian entities that are blacklisted.
Impact on Indian Pharma and Medical Sectors: The broader financial sanctions still affect the Indian pharmaceutical industry's ability to do business in Iran. Indian pharmaceutical companies might struggle with payment and export restrictions. Due to banking restrictions, making payments for drugs or receiving payments from Iran could be delayed or blocked. Though India exports a significant portion of its generic drugs to Iran, the sanctions may complicate these trade routes.
Geopolitical And Strategic Considerations: India's foreign policy has generally been to maintain good relations with both the US and Iran. US sanctions can create a tricky diplomatic situation for India.
India may need to adjust its stance to avoid falling foul of US sanctions, which could impact broader trade relations with the US or affect its access to international financial markets. The sanctions could have geopolitical consequences, particularly in the context of India's interests in the Middle East and its strategic partnership with the US
The recent US sanctions on Iran are likely to affect Indian companies in a variety of sectors, from energy and finance to pharmaceuticals and manufacturing. Certain limited categories of goods may have an exemption, but the situation will depend on the specific nature of the sanctions and how Indian businesses navigate these challenges, either by reducing exposure to the Iranian market or finding alternative means to continue their operations.
Indian companies should take the opportunity and assess the risk they may find themselves at by virtue of their business dealings with Iran/Iranian entities. It is imperative for Indian companies that deal with Iran, directly or indirectly, to proactively assess their businesses to decode the global commercial and regulatory risks involved in their transactions.
India's ability to maintain diplomatic flexibility and its economic relationship with both the US and Iran will be crucial in managing these impacts.
Sara Sundaram and Sahil Kanuga are partners at Cyril Amarchand Mangaldas.
Sign Up with Google
RECOMMENDED FOR YOU
Trump Eases Pressure On Iran By Saying China Can Buy Its Oil
Jun 24, 2025
Another Flight From Iran Carrying 311 Indians Lands In Delhi; Over 1,400 Evacuated So Far
Jun 22, 2025
Blocking Of Strait Of Hormuz Will Impact India's Energy Procurement: Experts
Jun 22, 2025
Strait Of Hormuz Closure? India Sitting Pretty On Oil Front, No Worries On Gas At All
Jun 22, 2025
POPULAR