The Trump administration is ramping up economic sanctions on Iran through "Operation Economic Outcast," while also threatening dire secondary sanctions against countries that continue Iran-related business.
The new policy puts countries like India and other close U.S. partners in an awkward situation.
New Delhi remains a critical U.S. partner in the Indo-Pacific, but it also has commercial, energy and strategic interests in Iran that it won't likely discard, potentially putting it at odds with the Trump administration.
On Monday, exactly a week after the Trump administration launched its new sanctions campaign, Indian Prime Minister Narendra Modi met with Iranian President Masoud Pezeshkian on the sidelines of the Shanghai Cooperation Organization summit in Kyrgyzstan. It was their first meeting since the war broke out six months ago.
According to an Iranian readout, Pezeshkian asked Modi "to use India’s extensive contacts" to help steer the involved parties away from war and back toward dialogue, while thanking Modi for standing by Tehran. Modi reiterated that New Delhi wants to strengthen its "long-standing friendship" with Tehran and "expand and diversify" the two countries’ trade basket.
"That was for Modi to signal to a domestic audience that he is not kowtowing to Trump," Council on Foreign Relations Senior Fellow Sadanand Dhume told Fox News Digital. "India-Iran relations have already been largely hollowed out by previous rounds of sanctions, so there is no question of India trying to balance between the U.S. and Iran," he added.
Secretary of State Marco Rubio was asked by Fox News' Brian Kilmeade on "Iranian oil shipments to India were valued at roughly $707 million in the first half of the year.
India has already come into the Treasury Department's crosshairs, with the U.S. sanctioning four India-based companies and three Indian nationals over alleged links to Iranian petroleum and petrochemical trade.
The Treasury Department says countries will receive a defined timeline to shut down Iran-related activity as identified by Washington. That puts banks, shippers, insurers and trade intermediaries on notice before any further penalties are imposed. The United Arab Emirates’ suspension of commercial and financial dealings with Iran has already squeezed Indian exporters, as Dubai has long served as a key hub for trade with Iran.
So far, Washington’s initial actions have stopped short of targeting India’s wider commercial relationship with Iran.
Iran, meanwhile, has warned of "grave consequences" for countries that cooperate with what it calls illegal U.S. behavior.
India's interests in Iran also run beyond commerce. The Chabahar port, Iran’s only oceanic port, supports trade routes linking India to Central Asia and Europe through Iran, while bypassing Pakistan. It also gives India an access route to Central Asia that bypasses Pakistan. But U.S. sanctions uncertainty has repeatedly complicated India’s operations there.
India, the world's third-biggest oil importer and consumer, has already faced the cost of the Middle East conflict, through energy disruptions, higher import costs and inflation. It has also shown it will resist U.S. pressure when core interests are at stake.
For instance, it has defended ties with Russia, despite Moscow’s adversarial relationship with Washington. But experts argue Iran no longer carries the same weight.
"The Russian example is strikingly different. New Delhi shares close military and diplomatic ties with Moscow that are much more important to India than its ties with Iran, notwithstanding lip service to the latter," Dhume said. "Higher global oil prices hurt India, but India weaned itself off Iranian oil imports a while back."
For the U.S., squeezing major economies like India over their ties to Tehran could pose a diplomatic risk. U.S. national security officials stress the need for a workable strategic relationship with India, especially to counterbalance Chinese power.
Under President Trump’s second term, once-blooming U.S.-India relations have been under strain. Trump and Modi sought to reset the relationship just months ago, but the latest Iran sanctions could test it again.
But the U.S. retains enormous leverage over India, particularly when it comes to trade.
"If forced to choose, New Delhi will obviously and emphatically choose its valuable commercial relationship with the U.S. over its skimpy trade ties with the Islamic republic," Dhume said.
The timing is notable, with Chinese President Xi Jinping reportedly set to visit India for next week’s BRICS summit. Russian President Vladimir Putin and Iranian President Masoud Pezeshkian are also expected to attend.
Analysts say the impact will ultimately depend on how aggressively Washington moves from warnings and diplomacy to actual secondary sanctions. That is particularly true with India, where more aggressive enforcement risks further straining U.S. relations with a strategically important partner.
"The U.S. should learn from its own past success in quietly persuading India to generally kick its Iran oil habit," Dhume said. "Quiet diplomacy works better with India than bluster. This is the key lesson from the past that the Trump administration appears to be forgetting."
The Indian government did not respond to Fox News Digital requests for comment.