India Must Navigate US Sanctions on Firms to Safeguard Business Interests, Says GTRI

India must tread carefully in response to US sanctions on certain Indian entities to safeguard business interests, according to the Global Trade Research Initiative (GTRI). Engaging diplomatically with the US and international bodies could help India seek solutions. The US imposed sanctions on nearly 400 entities, including 19 Indian companies, for allegedly supporting Russia's military activities in Ukraine.

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On November 1, five more Indian companies were added to the US Department of Commerce's entity list. These companies were accused of acquiring and redirecting US-made goods to Russia's defence sector. GTRI highlighted that unilateral sanctions by the US are controversial under international law, yet countries like India must navigate them cautiously.

Impact on Indian Businesses

The recent sanctions underscore the need for Indian businesses to adhere to both local and international trade regulations. Companies should be vigilant to avoid inadvertently supporting sanctioned entities or nations. The GTRI report noted that some sanctioned Indian companies exported dual-use items, which have both civilian and military applications.

These exports included not only US-origin goods but also locally produced items sent to Russian military sectors. The scrutiny on Indian exporters has increased due to these activities. Ajay Srivastava, GTRI founder, stated that India does not support unilateral sanctions outside UN mandates.

Compliance and Trade Restrictions

India's sanctions policy focuses on trade restrictions with specific countries like Iran and North Korea. Srivastava emphasized India's commitment to sovereignty while honouring international non-proliferation agreements, such as UNSC Resolution 1540. He stressed the importance of strong compliance programs for businesses.

Companies should regularly check export control lists like India's SCOMET and US BIS regulations. Non-compliance can lead to severe consequences, including trade restrictions and frozen assets. It is crucial for Indian companies to monitor their supply chains, especially in high-risk areas.

Consequences of Non-Compliance

The GTRI report warned that failing to comply could isolate businesses commercially. US sanctions not only block transactions with American companies but can also deter global partners with US ties. As India aims to become a net exporter, particularly in defence exports, businesses must prioritise knowledge, training, and compliance.

The cost of non-compliance is too high for businesses to ignore. The report was prepared by Srivastava and Ameeta Verma Duggal from DGS Associates. It detailed how US sanctions include blocking access to financial systems, freezing assets, visa restrictions, and denying trade opportunities.

Companies violating these sanctions may face commercial isolation even if their dealings with the US are limited. Regularly reviewing the SCOMET list helps identify products that may face export restrictions. This proactive approach is essential for maintaining global business relationships.