Context

• In an interconnected global economy, economic sanctions have become instruments of geopolitical power.
• Measures taken by Washington or Tehran can move through banks, insurers, shipping routes and commodity markets before affecting Indian companies, workers and households.
• Recent U.S. sanctions on Indian entities over alleged Iranian oil and petrochemical dealings, alongside Iran’s listing of vessels connected with India, reveal India's growing exposure to external economic coercion.
• The central challenge is developing the institutional capacity to anticipate and manage such pressures while preserving strategic autonomy.

Weaponised Interdependence

• Globalisation has created extensive financial, technological and maritime networks.
• States controlling critical nodes within these networks can use them to exert pressure, a phenomenon known as weaponised interdependence.
• An Indian company may comply with domestic law but still depend on an American bank for payments, foreign insurers for shipping or international infrastructure for cargo delivery.
• Secondary sanctions can therefore influence businesses outside the sanctioning country's jurisdiction.
• Fear of losing access to American finance and dollar payments can discourage companies from conducting otherwise lawful trade.
• Since 2018, sanctions on Iran and, particularly after 2022, sanctions on Russia have increasingly targeted banks, insurers, tankers, traders, ship managers and technology suppliers.
• Sanctions consequently affect entire transaction networks rather than merely the original target.

India’s Emerging Vulnerabilities

• India is increasingly exposed to pressure from competing geopolitical directions.
• The United States sanctioned four India-based companies and three Indian nationals over alleged Iranian oil and petrochemical trade.
• Iranian authorities separately listed vessels serving or registered in India, creating risks of fines, detention or confiscation in the Strait of Hormuz.
• These measures operate through different chokepoints. U.S. pressure primarily works through financial and commercial networks, while Iranian actions create risks to physical maritime movement.
• Potential American tariffs linked to India's purchases of Russian oil could further connect energy security, foreign trade and geopolitics. 

Domestic Consequences of External Pressure

• Disruptions to energy supplies and shipping can increase LPG, fertilizer, transportation and food costs, while maritime restrictions can affect Indian seafarers and businesses.
• India's response during the West Asia crisis has included monitoring vessels and supplies, increasing LPG production and arranging alternative cargoes.
• Such coordination demonstrates the importance of integrating foreign policy with energy, trade, finance and maritime security.
• However, emergency coordination should develop into permanent institutional capacity.

Why India Cannot Simply Follow China?

• China has adopted a stronger position against unilateral American sanctions and possesses greater economic leverage through its huge domestic market, state-directed economy and control over critical supply chains.
• India's circumstances differ because of its significant commercial and financial ties with the United States.
• Simply adopting Beijing's approach could impose substantial costs on Indian exporters and financial institutions.
• India maintains that it recognises UN Security Council-mandated sanctions while not automatically accepting unilateral sanctions.
• The practical challenge is balancing this position with the need to protect energy supplies, trade and economic stability.
• India must maintain working relationships with the United States, Russia, Iran and Gulf countries while protecting its own interests.

The Way Forward

• Need for an Economic Security Framework
  • India could establish an Economic Security and Sanctions Office under the Cabinet Secretariat to coordinate responses to economic coercion.
  • It could bring together officials dealing with foreign affairs, finance, commerce, energy, shipping, law and defence, alongside the RBI and market regulators.
  • Its responsibilities could include:
    • Monitoring sanctions and counter-sanctions.
    • Identifying vulnerabilities in payments, insurance, shipping and logistics.
    • Examining the basis of foreign sanctions.
    • Supporting legitimate delisting requests.
    • Negotiating exemptions and transition periods.
    • Issuing clear guidance to banks and businesses.
    • Developing alternative payment and shipping arrangements.
  • Banks should distinguish between legally prohibited transactions and commercially risky transactions, while companies should receive early warnings about vulnerable payment channels, insurers and ports.
• Building Strategic Economic Resilience
  • Long-term resilience requires reducing dependence on individual external chokepoints.
  • India needs greater LPG storage, a larger Indian-controlled tanker fleet and stronger domestic maritime insurance mechanisms.
  • Diversifying LNG contracts and shipping routes can reduce dependence on Hormuz.
  • Rupee-based settlement can support lawful trade where partners accept it, but it cannot completely eliminate sanctions exposure because participating banks may remain connected to the U.S. financial system.

Conclusion

• Modern sanctions demonstrate that economic sovereignty depends not only on domestic law but also on access to critical global networks.
• India cannot control every external chokepoint, but it can reduce the consequences of dependence on them.
• The objective should neither be automatic compliance nor unnecessary confrontation.
• India needs the capacity to anticipate economic coercion, protect citizens and businesses, and preserve relationships with competing powers.
• In an era of weaponised interdependence, strategic autonomy increasingly depends on strategic resilience.