India needs to carefully manage the recent US sanctions on certain Indian entities to safeguard its business interests, a report from the Global Trade Research Initiative (GTRI) said on Friday.
The think tank also recommended engaging diplomatically with the United States and other international bodies to seek potential remedies.
The sanctions, imposed on 30 October by the US State Department and the Treasury’s Office of Foreign Assets Control (OFAC), targeted nearly 400 entities and individuals, including 19 Indian companies and two individuals. These sanctions were imposed for allegedly supporting Russia’s military activities in Ukraine.
The US Department of Commerce added five Indian companies to its entity list on 1 November, accusing them of acquiring and rerouting US-made goods to Russia’s defence sector.
"While unilateral sanctions imposed by the US are controversial under international law, the practical reality is that countries like India must navigate these sanctions carefully to protect their business interests," GTRI said in its report.
It also suggested that India could challenge the sanctions at the World Trade Organisation (WTO) if they violate international trade rules or harm Indian businesses.
The sanctions highlight the importance of Indian businesses adhering to both local and international trade regulations, particularly when dealing with dual-use goods that can have both civilian and military applications.
The GTRI emphasised the need for vigilance to avoid inadvertently supporting sanctioned entities or countries.
The report noted that some of the sanctioned Indian companies were involved in exporting dual-use items, including both US-origin and locally produced goods, which were later sent to Russia’s military sectors.
US sanctions also apply to companies that divert US-made items, which has resulted in increased scrutiny of Indian exporters.
GTRI founder Ajay Srivastava said that while India does not support unilateral sanctions outside of UN mandates, its sanctions policy focuses on trade restrictions with specific countries like Iran and North Korea. He also noted that India’s response reflects its commitment to sovereignty, while adhering to international non-proliferation agreements, such as the UNSC Resolution 1540, which is enforced through India’s Weapons of Mass Destruction Act.
Srivastava stressed that Indian businesses must have strong compliance programs and regularly review export control lists such as India’s SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies) list and US Bureau of Industry and Security (BIS) regulations.
He warned that failure to comply could result in serious consequences, including trade restrictions, frozen assets, and lost market access.
"Non-compliance could isolate businesses commercially, as US sanctions not only block transactions with US companies but also discourage global partners with ties to the US," the GTRI report stated.
As India seeks to increase its exports, particularly in defence, the think tank said businesses must adopt a strategy of "Knowledge, Training, and Compliance," given the high costs of non-compliance. The report emphasised that the cost of failing to comply with sanctions is far too high for businesses to ignore.
The US sanctions include blocking access to financial systems, freezing assets, imposing visa restrictions, and denying trade opportunities. Companies in violation could face commercial isolation, even if their business dealings with the US are limited.
The report was jointly prepared by Ajay Srivastava and Ameeta Verma Duggal, Partner at DGS Associates.
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