Indian Prime Minister Narendra Modi met with Iranian President Masoud Pezeshkian on the sidelines of the Shanghai Cooperation Organization summit in Kyrgyzstan, their first encounter since the Middle East conflict escalated six months ago. The meeting came exactly one week after the Trump administration launched a new sanctions campaign against Tehran, a policy that places close US partners like India in a delicate position.
According to an Iranian readout of the talks, Pezeshkian asked Modi to use India's extensive contacts to help steer the involved parties away from war and back toward dialogue, while thanking the Indian leader for standing by Tehran. Modi reiterated that New Delhi wants to strengthen its long-standing friendship with Tehran and expand and diversify the trade basket between the two countries.
The outreach reflects the awkward position India now occupies. New Delhi remains a critical US partner in the Indo-Pacific, but it also maintains commercial, energy and strategic interests in Iran that it is unlikely to discard, potentially putting it at odds with the Trump administration's pressure campaign.
Secretary of State Marco Rubio said Tuesday that he did not believe there was a trade deal between India and Iran, noting that many countries around the world talk to Tehran. He emphasized that no country should help Iran evade sanctions or create mechanisms for Tehran to generate revenue that could be used to sponsor terrorism or build a nuclear weapon, warning that countries doing so would face sanctions themselves. A US official echoed those comments, saying the administration continues to have positive discussions with 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.
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.
Washington has already taken action against Indian entities. The Treasury Department has sanctioned four India-based companies and three Indian nationals over alleged links to Iranian petroleum and petrochemical trade. Treasury officials say countries will receive a defined timeline to shut down Iran-related activity as identified by Washington, putting banks, shippers, insurers and trade intermediaries on notice before 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 Tehran, which has warned of grave consequences for countries that cooperate with what it calls illegal US behavior.
India's interests in Iran extend beyond commerce. The Chabahar port, Iran's only deep-water oceanic port, provides maritime routes linking India to Russia and Europe and gives New Delhi an access route to Central Asia that bypasses Pakistan. US 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 US pressure when core interests are at stake, notably by defending ties with Russia despite Moscow's adversarial relationship with Washington.
Experts argue, however, that Iran no longer carries the same weight for India. Council on Foreign Relations Senior Fellow Sadanand Dhume said India-Iran relations have already been largely hollowed out by previous rounds of sanctions, leaving no question of India trying to balance between the US and Iran. He noted that India's close military and diplomatic ties with Moscow are much more important to New Delhi than its ties with Tehran, and that India weaned itself off Iranian oil imports a while back.
For the US, squeezing major economies like India over their ties to Tehran could pose a diplomatic risk. US national security officials stress the need for a workable strategic relationship with India, especially to counterbalance Chinese power in the region.