The next sanctions crisis may begin with a name on a Washington list and end in an Indian kitchen. Between them lie a New York bank, a London insurer, a tanker in the Strait of Hormuz and several Ministries in Delhi. Foreign pressure moves through one system. No single Ministry follows the whole journey. Diplomacy, law, banking, trade, shipping and fuel supplies sit in different parts of government. Who owns the combined response?

Washington sanctioned four companies based in India and three Indian nationals over alleged trade in Iranian oil and petrochemicals. Tehran listed an LNG carrier serving India and an Indian-flagged bulk carrier for possible fines, detention or confiscation in the Strait of Hormuz. One order travels through bank wires; the other waits at sea.

‘Weaponised interdependence’

India makes its own laws and foreign policy. Yet, an Indian company may need an American bank for payment, a foreign insurer for its ship, and safe passage to deliver cargo through a strait that another state can disrupt. Whoever controls a critical network can exert pressure on those who depend on it. Scholars call this weaponised interdependence.

Secondary sanctions tell a foreign business to abandon a targeted transaction or risk losing access to American finance. On August 24, the United States widened that threat under Operation Economic Outcast across five Iranian sectors: digital assets, technology, gold, aviation and shipping. On September 14, Washington imposed Iran-related sanctions on Russia’s VTB Bank, which has a Delhi branch. Banks dealing with it face sanctions risk, even where a transaction is permitted under Indian law.

American laws in the 1990s threatened foreign companies with penalties for conduct abroad. Europe responded with a Blocking Statute. When secondary sanctions against Iran returned in 2018, several European companies withdrew despite having legal protection at home. The possible loss of access to American banking and dollar payments was enough to choke off trade that remained legal in Europe. Sanctions against Russia widened after 2022. Export controls pursued foreign suppliers of chips and machine tools. Oil restrictions reached tankers, insurers, ship managers and traders. Sanctions increasingly followed the transaction rather than stopping with the seller. On September 16, the U.S. Congress passed a sanctions bill that would authorise the U.S. President to impose tariffs as a form of economic coercion. Indian exports to the U.S. could face tariffs of up to 100% over India’s purchases of Russian oil. The Indian government is monitoring developments and has said that it will work with industry to protect India’s trade and economic interests.

Iran is using a different chokepoint at sea. On August 23, its Persian Gulf Strait Authority published a list of 45 vessels it called non-compliant. They included Disha, chartered by Petronet LNG and managed by the Shipping Corporation of India, and Maha Roos, an Indian-flagged bulk carrier. The authority did not explain the alleged breaches. By September 14, the list had grown to 77. The authority also warned insurers against covering listed ships. Washington has already sanctioned the authority and warned that seeking passage guarantees from it could carry sanctions risks, even without payment.

The domestic consequences

Economic coercion ties foreign policy directly to the domestic economy. Its consequences reach households, farmers and seafarers. No Ministry can see the whole chain on its own.

During the current West Asia crisis, the government coordinated Ministries, monitored vessels and supplies, raised LPG production and found alternative cargoes. It has kept pumps open and kitchens supplied.

That coordination should survive the crisis. An Economic Security and Sanctions Office under the Cabinet Secretariat should become India’s permanent war room for economic coercion. It should bring together officials responsible for foreign policy, finance, commerce, energy, shipping, law and defence, alongside the Reserve Bank of India and market regulators. Its staff should track where transactions could fail, from payment and insurance to shipping and delivery.

It would seek evidence behind foreign listings, support legitimate requests for removal, negotiate written exemptions and transition periods, and issue clear Indian guidance. Banks should distinguish legal prohibitions from their own commercial caution. Companies should be warned early when a payment route, insurer or port is at risk.

India also needs more LPG storage, an expanded Indian-controlled tanker fleet and a stronger Bharat Maritime Insurance Pool, while securing long-term LNG contracts outside Hormuz. Rupee settlement can preserve lawful trade when sellers accept it, but cannot shield a bank that still needs New York.

Why India cannot follow China’s stand

China has said that the American measures had no basis in international law or authorisation from the United Nations Security Council (UNSC). Earlier in May, Beijing told Chinese businesses not to recognise, enforce or comply with American sanctions against five Chinese refining companies. India also says that it upholds sanctions mandated by the UNSC and does not accept unilateral sanctions. That does not mean Delhi can simply copy Beijing. China’s market power, state-directed economy and leverage over critical supply chains give it more room to resist.

India’s financial and commercial ties with the U.S. make adopting Beijing’s approach costly. A legal objection alone offers little comfort if Indian firms still bear the cost. India must protect household energy, seafarers, fertilizer supplies and lawful trade while preserving ties with the U.S., Russia, Iran and the Gulf. Delhi needs the full picture in one room before it acts.

The first test of sovereignty happens when Delhi decides. The second comes when that decision meets a New York bank or the Strait of Hormuz. In the age of sanctions, India cannot move those chokepoints. It can, however, make sure that every decision is taken with the whole journey in view.

Syed Akbaruddin is a former Permanent Representative of India to the United Nations and, currently, Dean, Kautilya School of Public Policy, Hyderabad