Indian Strategy to Counter U.S. Tariff Attacks; Iran Extends Friendship, Proposed Plan to Limit Trump's Actions
In the first four months of 2025, Iran and India maintain an active but somewhat constrained economic relationship, with trade volumes standing at around $652 million. This figure represents a slight decline compared to 2024, with Indian exports focusing on non-oil goods such as rice.
Both countries recognise the need to diversify and deepen trade beyond current limited sectors. Iran, in response to escalating regional conflicts and Western-led economic isolation, is intensifying its pivot towards Eurasian partners, including India. This strategic move is evident in Iran's participation in multilateral platforms such as the Shanghai Cooperation Organisation (SCO) and BRICS, which prioritise strengthening ties with India, Russia, and China for trade, logistics, and infrastructure development.
India, on the other hand, is maneuvering a pragmatic policy. Amid escalating trade friction with the U.S., including sharply increased tariffs up to 50% imposed by former U.S. President Donald Trump in 2025, India is balancing its deepening Western alignments with independent engagement with Iran. Notably, India continues limited oil imports from Iran and has expanded a Rupee–Rial payment mechanism. This mechanism aims to insulate bilateral energy trade from U.S. sanctions and pressure, forming part of India’s effort to bypass some U.S. leverage and maintain energy security despite the tensions.
Iran's Ambassador to India, Dr. Iraj Elahi, has emphasised the need for a full revival of energy trade between India and Iran. Elahi cast India and Iran as natural partners in what he called an "Asian century." He also suggested that trade in local currencies could reduce reliance on the U.S. dollar and build economic resilience.
Elahi dismissed Trump's criticism of Indian companies engaging with Iran as a fear tactic that no longer carries the same weight. He urged a full revival of energy trade between India and Iran, positioning Iran as a key player in India's energy security.
The moves by Iran are in response to the escalating trade friction between India and the U.S. If successful, the Iran-India cooperation could reshape the balance of economic alliances in Asia. This alignment, if pursued, would test Washington's ability to contain Iran's influence.
The Chabahar Port remains a strategic node in India-Iran connectivity ambitions, critical for regional trade beyond Pakistan and U.S. leverage. Iran has offered discounted oil supplies, fresh investment opportunities, and expanded cooperation in high-value sectors to India. Iran is "fully ready" to resume shipments of oil to India at competitive prices.
In summary, while U.S. trade actions have strained India’s broader economic relations with Washington, India and Iran continue pragmatic cooperation motivated by mutual interests in energy, regional connectivity, and geopolitical leverage. Both sides are working toward diversifying and expanding trade to reduce vulnerability to external disruptions, though trade volumes have seen modest declines and face political challenges.
This pattern suggests a calculated, interest-driven Iran-India relationship navigating complex geopolitics while attempting to sidestep U.S. economic pressure.
- Despite the declining trade volumes, Iran and India are intensifying their efforts to diversify and deepen their economic relationship, especially in the areas of energy, regional connectivity, and high-value sectors, such as the use of local currencies to reduce reliance on the U.S. dollar and build economic resilience.
- Iran's participation in multilateral platforms like the Shanghai Cooperation Organisation (SCO) and BRICS, and India's expansion of a Rupee–Rial payment mechanism, are evidence of a calculated, pragmatic Iran-India relationship, aiming to reshape economic alliances in Asia and test Washington's ability to contain Iran's influence, amid escalating trade friction with the U.S.
