By Sanskriti Global Exports by Himanshu Gupta

Navigating the New Sanctions Maze: What Trump's Latest Move on Russia Means for Indian Trade

Introduction

The geopolitical chessboard has just seen a significant move, and Indian businesses are positioned precariously close to the centre. As of today, a new, more stringent set of sanctions enacted by the Trump administration against Russia has come into force. While previous trade actions, such as tariffs, were viewed as a manageable cost of business, this latest development represents a fundamental shift. The focus has sharpened from broad-based tariffs to targeted sanctions aimed at Russia's energy behemoths. For Indian import-export professionals, this is no longer a simple question of price; it's a question of viability. The core dilemma for New Delhi and Indian industry is stark: how to sustain a time-tested, strategic energy partnership with Russia without inviting the wrath of the United States, a critical economic and strategic partner.

The Geopolitical Backdrop: From Tariffs to Targeted Sanctions

To understand the gravity of the current situation, it's essential to distinguish between the economic tools being deployed. The tariffs previously discussed in US-India trade negotiations were a matter of economic leverage—making Russian crude more expensive but not impossible to procure. India, prioritizing its energy security and capitalizing on discounted prices, largely absorbed these costs and continued its purchases. The latest measures, however, are a different beast entirely. These are secondary sanctions, likely enforced under an expanded interpretation of the Countering America's Adversaries Through Sanctions Act (CAATSA).

Unlike tariffs, which are a tax, secondary sanctions are a prohibition. They are designed to isolate sanctioned entities from the global financial and commercial system. The primary targets, as indicated by early reports, are Russian state-controlled oil and gas giants like Rosneft and Gazprom, along with the vast ecosystem of entities that facilitate their trade. The explicit goal is to cripple their ability to transact internationally. The “secondary” nature of these sanctions is what poses the direct threat to India. They empower the US Treasury to penalize any third-country entity—be it a bank, a shipping line, an insurance provider, or a refinery in Mumbai—that engages in “significant transactions” with these blacklisted Russian firms. This move is a classic power play, applying pressure not only on Moscow but also on its key commercial partners, using access to the US dollar and the American market as the ultimate enforcement mechanism. It also adds a complex and high-stakes variable to the ongoing US-India trade deal negotiations, turning a trade discussion into a much broader strategic alignment test.

Implications for Indian Import-Export Professionals

For businesses on the ground, the abstract language of geopolitics translates into concrete operational risks. The impact extends far beyond the oil and gas sector, threatening to disrupt established trade patterns. Here is a breakdown of the key implications:

• Payment & Financial Blockades: This is the most immediate and critical threat. Any transaction involving US dollars, even for non-US companies, typically clears through a US correspondent bank. Secondary sanctions mean these banks will refuse to process payments destined for or originating from sanctioned Russian entities. This effectively cuts off the primary channel for international trade. While the rupee-rouble payment mechanism exists, its capacity is limited and it is not robust enough to handle the massive volume of energy trade. Indian banks with any exposure to the US market will be exceedingly cautious, leading to payment delays, rejections, and a potential freeze on trade financing for any deal with a Russian nexus.
• Shipping, Insurance, and Logistics Paralysis: A tanker of crude oil is useless if it cannot be moved or insured. The world's leading maritime insurance and reinsurance markets are concentrated in London and Europe, but are deeply integrated with the US financial system. These firms are highly risk-averse and will likely refuse to underwrite voyages carrying sanctioned Russian cargo to avoid US penalties. Similarly, major global container and tanker fleet operators may refuse to service routes involving sanctioned Russian ports or companies. This will create a severe logistics bottleneck, forcing Indian importers to scramble for alternative, less reliable, and far more expensive shipping and insurance options, if any exist at all.
• Direct Hit on Crude Oil Refiners and Energy Security: Indian refineries, both state-owned and private, have become major consumers of discounted Russian Urals crude. This has helped manage the country's inflation and trade deficit. The new sanctions force a painful choice: either cease these purchases and return to more expensive Middle Eastern or African crude, impacting margins and domestic fuel prices, or attempt to find sanction-proof ways to continue, risking devastating penalties. This uncertainty complicates long-term procurement planning and jeopardizes India's carefully managed energy security strategy.
• Collateral Damage and Supply Chain Contagion: The chill effect of these sanctions will not be confined to oil. Indian engineering firms with contracts to supply equipment to Russian energy projects, pharmaceutical exporters who use established Russian trade channels, and agricultural commodity traders may all find their payments stuck and their logistics in disarray. The perceived risk of “doing business with Russia” will rise across all sectors. International partners, investors, and lenders will increase their scrutiny of Indian companies, demanding enhanced due diligence to ensure no direct or indirect exposure to sanctioned entities, adding a significant layer of compliance and cost.
• The Strategic Due Diligence Imperative: Businesses can no longer rely solely on government-to-government diplomacy to shield them. While New Delhi will undoubtedly seek waivers and diplomatic solutions, these are uncertain and can take time. The onus is now on corporate leadership to implement a proactive strategy. This includes conducting rigorous due diligence on all counterparties in a supply chain, reviewing all contracts for sanctions clauses, diversifying both supplier and customer bases away from high-risk jurisdictions, and developing contingency plans for payment and logistics disruptions.

Conclusion: A Call for Agility and Foresight

The implementation of these US sanctions marks a pivotal moment for Indian international trade. We have moved from a challenge of cost (tariffs) to a challenge of compliance and access (sanctions). For the Indian import-export community, complacency is not an option. The potential penalties for non-compliance—including being cut off from the US financial system—are existential.

The path forward requires a new level of diligence and strategic agility. Businesses must become experts in the fine print of international sanctions law, invest in robust compliance frameworks, and actively scenario-plan for further disruptions. The coming weeks will be crucial. Watching the Indian government's diplomatic response and the evolution of the US-India trade talks will provide vital clues. However, the most resilient businesses will be those that hope for the best diplomatically but prepare for the worst operationally. In this new era, geopolitical risk analysis is no longer a task for the foreign ministry alone; it is an essential function for every Indian C-suite involved in global trade.

Source: Original