Indian rice exporters to face biggest hit from US sanctions; UAE trade freeze threatens payment route
US sanctions on Iran could disrupt India’s $1.63 billion bilateral trade, with rice exporters particularly vulnerable as the UAE’s suspension of Iran-related transactions threatens a key payment channel. Alternative routes through Turkey could increase shipping times, freight costs and compliance challenges.
The US’ “Economic D-Day” sanctions against Iran could disrupt India’s $1.6 billion trade with the country, with rice exporters likely to bear the brunt as a key payment channel through the UAE shuts down.
According to Commerce Ministry data, India’s trade with Iran stood at $1.63 billion in 2025-26, as of August 25, 2026. Indian exports accounted for $1.26 billion of the total.
India has so far used the UAE as an intermediary for settling payments with Iran. Under the arrangement, the UAE collected payments from Iran and transferred them to Indian exporters, and facilitated transactions in the other direction.
However, the UAE’s suspension of all trade and financial transactions with Iran last week threatens to bring this mechanism to a halt. Several Indian traders have already begun facing payment-related difficulties and are exploring Turkey as a possible alternative, according to people familiar with the matter.
Shipping goods to Iran could also become more expensive and time-consuming. Exporters may have to route consignments through a transit country instead of shipping them directly to Iran. Turkey is being considered as one option, although such an arrangement would require its cooperation and bring additional logistical and compliance challenges.
Using Turkey as a transit point could increase journey times by three to four times and push up freight costs. Shipments may have to travel through the Red Sea to Turkey before being transported overland to Iran, adding both cost and risk.
“Anyone indulging in any trade with Iran will face sanctions, and every part of the trade will be included. This will also mean that the oil sanctions that were temporarily lifted by the US in March will come into effect once again. Also, though Indian traders can use Turkey or any other transit destination, showing that their consignments are not meant for Iran (if the other country agrees), and skip the US sanctions, this will have its challenges, including, but not limited to, increased export costs,” economist Madan Sabnavis told CNBC-TV18.
Rice exporters are particularly exposed. India exported rice worth $810.08 million to Iran in 2025-26, including shipments valued at $383.11 million in the first half of 2026.
India also imported Iranian crude worth $707 million after US restrictions on the oil were eased in April. Sabnavis, however, said losing these supplies would be manageable for India.
“A halt in crude imports won’t affect India too much. This is the amount India was happy to have, but it won’t impact us too much if it’s not there. It’s the rice and other traders who will be more affected,” he told CNBC-TV18.
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Source : CNBC Tv18
