OFAC Sanctions on Iran and Their Impact on Indian Businesses

On 9 October 2025, the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced a new round of sanctions targeting more than 50 individuals, entities, and vessels alleged to be involved in the sale and transport of Iranian oil and liquefied petroleum gas (“LPG”).

Notably, the sanctions include eight Indian nationals and nine Indian companies, all of whom have been added to OFAC’s Specially Designated Nationals and Blocked Persons List (“SDN List”). These designations place them alongside entities and individuals that OFAC associates with Iranian-backed networks engaged in activities viewed as hostile to US interests.

Of the nine Indian companies sanctioned, eight operate in the petrochemical distribution sector, while one is engaged in shipping operations. Among the eight individuals designated, five are directors of the petrochemical companies, and three are vessel owners identified by OFAC as facilitating Iranian oil trade.

This action follows an earlier tranche of sanctions imposed in July 2025, when six Indian companies were sanctioned for allegedly purchasing Iranian oil. Together, these developments reflect an intensified enforcement posture against entities linked, directly or indirectly, to Iran’s energy trade.

Background Trends in US Sanctions Policy

In August 2018, the President of the United States issued Executive Order 13846, reinstating all US sanctions that had previously been lifted or waived under the Joint Comprehensive Plan of Action. This followed the United States’ withdrawal from the agreement on 8 May 2018. Executive Order 13846 continues to serve as the primary legal basis for sanctions targeting Iran.

Further authority was introduced through Executive Order 13902 in January 2020, which empowered the US Treasury to block the property and interests of persons operating in specified sectors of the Iranian economy. These sectors include petroleum and petrochemicals, as well as foreign financial institutions that facilitate Iran’s revenue streams while knowingly breaching sanctions. This framework also permits the imposition of secondary sanctions on non-US persons and entities operating outside the United States.

Sanctions enforcement was reinforced again through National Security Presidential Memorandum-2, issued on 4 February 2025, which reaffirmed a policy of “maximum pressure” against Iran. The memorandum directed the Treasury to identify and sanction all persons contributing to Iran’s revenues and cash flows, and to ensure strict implementation of existing measures.

Given President Trump’s stated intention to use sanctions as a central tool of foreign policy enforcement, businesses operating internationally are increasingly exposed to compliance risks and are often compelled to adjust commercial strategies to align with US policy positions.

Key Implications of OFAC Sanctions

For individuals and entities designated by OFAC, the most immediate effects arise through interactions with the US financial and commercial system.

First, all property and interests in property belonging to sanctioned persons, and held by or under the control of US persons, are subject to blocking. Such property may not be transferred, withdrawn, or otherwise dealt with, and US persons holding such assets are required to report them to the relevant authorities.

Second, entities that are owned, directly or indirectly, 50 per cent or more by sanctioned persons are themselves treated as blocked, irrespective of whether the ownership threshold is met individually or collectively.

Third, US nationals, as well as non-US persons present within the United States, are prohibited from engaging in any transactions involving blocked property or interests. Breaches of these restrictions may attract enforcement action under OFAC’s Economic Sanctions Enforcement Guidelines.

Fourth, based on its enforcement history, OFAC has indicated that it may impose secondary sanctions on foreign financial institutions located outside the United States if they are found to facilitate the activities of sanctioned persons. Such measures can significantly limit access to global banking channels and alternative commercial arrangements.

Fifth, in the context of evolving trade dynamics, including rising tensions between the United States and China and the possibility of additional tariffs of up to 100 per cent, Indian companies may otherwise be well positioned to integrate into global supply chains. However, failure to comply with OFAC requirements may prevent businesses from capitalising on these opportunities.

Options for Delisting and Legal Responses

Several jurisdictions, including Australia, China, and the European Union, have enacted “blocking statutes” aimed at countering the extraterritorial application of US secondary sanctions. India has not adopted comparable legislation, possibly to avoid disrupting international trade relationships. At the same time, India has consistently stated that it does not recognise unilateral sanctions and has voted against them in international forums.

In the absence of domestic blocking legislation, Indian entities affected by OFAC designations must consider available legal remedies within the US sanctions framework. OFAC itself states that the objective of sanctions is not punitive, but to encourage a change in conduct. Accordingly, designated persons may seek removal from the SDN List by submitting a petition to OFAC.

Delisting requests may be based on several grounds, including that the original designation was made on insufficient or incorrect evidence. Alternatively, a petitioner may demonstrate that the conduct leading to designation has ceased and is now consistent with OFAC requirements. Removal may also be sought where the factual basis for designation no longer exists, or, in certain cases, upon the death of the designated individual.

To pursue delisting effectively, it may be necessary to obtain and review the materials relied upon by OFAC in making the designation decision. The process often involves ongoing engagement with OFAC, including responding to detailed questionnaires and requests for clarification. Submissions that OFAC considers incomplete, inaccurate, or misleading may result in extended timelines or rejection of the petition. As a result, informed legal strategy and professional guidance are critical.

Current Position and Risk Assessment

At present, India does not have statutory mechanisms to shield its businesses from the effects of either primary or secondary sanctions imposed by foreign states. Indian entities with cross-border operations must therefore conduct careful risk assessments and evaluate potential legal and commercial exposure when engaging in activities that may attract sanctions scrutiny.

In an environment of heightened enforcement and geopolitical uncertainty, proactive compliance, contractual safeguards, and informed decision-making remain essential to mitigating both financial and strategic risk.