Modi-Iran Meeting Tests India Amid US Sanctions Warnings

The Trump administration is intensifying its pressure campaign against Iran with a fresh sanctions drive dubbed “Operation Economic Outcast,” coupled with warnings of severe secondary penalties for nations that keep doing business tied to Tehran.

The tougher Iran sanctions strategy creates a diplomatic dilemma for countries such as India, along with other key U.S. allies and partners.

New Delhi is a cornerstone of Washington’s Indo-Pacific strategy, but India also maintains important trade, energy and strategic links with Iran—interests it is unlikely to abandon easily. That balancing act could place India on a collision course with the Trump administration’s latest approach to Tehran.

The meeting came Monday, one week after the Trump administration unveiled its new sanctions initiative. Modi and Pezeshkian sat down on the sidelines of the Shanghai Cooperation Organization summit in Kyrgyzstan, marking their first face-to-face talks since the war began six months earlier.

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 News Media. “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 “The Brian Kilmeade Show” Tuesday about Modi’s meeting with the Iranian president.

Rubio said he didn’t think there was a trade deal between India and Iran — noting many countries around the world talk to Tehran — and stated, “What ultimately happens, though, is – and the President’s been very clear – is no country should be helping Iran evade sanctions. No country should be out there helping them create mechanisms by which they can generate revenue that they will then use to sponsor terrorism and try to build a nuclear weapon. And if countries decide to do that, then we’re going to have to sanction them too.”

A U.S. official echoed Rubio’s comments and told News Media that, “the Administration continues to have positive discussions with our economic partners to ensure Iran never possesses a nuclear weapon.”

India has been among Iran’s top five trading partners in recent years, though bilateral trade has dropped dramatically since its 2018-19 peak.

New Delhi’s exports to Iran are concentrated on goods that can carry humanitarian exemptions, including pharmaceuticals. Iran is also the second-largest overseas market for Indian rice, with India exporting more than $383 million worth in the first six months of the year.

Conversely, India resumed importing Iranian crude oil for the first time in seven years in April, after the Trump administration temporarily lifted sanctions to soften the Middle East conflict’s impact on global energy. 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 News Media requests for comment.