Introduction
Sanctions have become an "invisible border" in global business, blocking deals before they begin. For CEOs and CFOs, understanding and managing sanctions is essential, not just for compliance but also for competitive advantage. Indian leaders at companies like Reliance and Tata and global firms like Maersk and Shell have all seen their supply chains and market access reshape by evolving sanction regimes. Addressing sanctions risk is an operational and strategic necessity at every enterprise level.
Sanctions Explained: The Power Play Behind Modern Trade
Sanctions are government actions that block market access, freeze assets, restrict technology transfers, or limit currency use, going well beyond standard tariffs.1 They are used to pressure change or signal political intent without conflict.
Sanctions typically fall into three types:
- Comprehensive: halt all trade with a country.
- Targeted: restrict specific businesses, individuals, or sectors.
- Secondary: penalize anyone globally who does business with sanctioned entities.
Sanctions as Strategy: How Leading Economies Use Their Leverage
Sanctions have become intentional strategic tools, with both competitive and collateral effects.
United States
The United States enforces the world's most wide-ranging sanctions, led by agencies like Office of Foreign Assets Control (OFAC) and Bureau of Industry and Security (BIS). U.S. rules apply globally. Any deal using American dollars, technology, or personnel can trigger sanctions, even abroad. Secondary sanctions extend this reach, allowing penalties on non-U.S. companies that work with blacklisted parties, threatening access to U.S. financial markets.
For example, Siemens AG completely overhauled its international compliance and internal controls after resolving allegations of export and anti-corruption violations; in the OFAC Enforcement Release, it agreed to over $800 million in U.S. penalties.2 Maersk, the global logistics leader, publicly urges customers to ensure their shipments comply with OFAC restrictions and may reject or halt deliveries transiting U.S. jurisdiction3. Indian multinational Dr. Reddy's invests substantial resources in due diligence to prevent inadvertent exposure, especially when payments are routed through American banks.4 These examples highlight how the U.S. system dictates global compliance strategies for any internationally active company.
European Union
The European Union enforces broad sanctions beyond basic asset freezes or travel bans. These measures restrict exports of advanced technology, dual-use goods, and financial services. Sanctions can target entire countries or sectors responding to global events, such as actions against Russia and Belarus. Companies, including Indian exporters, must adapt quickly to updates and changing product control lists. Staying compliant requires ongoing monitoring and detailed documentation for end use and end users.
Leading Indian IT provider Tata Consultancy Services (TCS) has revised its European service contracts and supply chains to align with tightening EU rules on dual-use exports, according to the EU Sanctions Map.5 Pharmaceutical exporter Sun Pharma has faced payment delays after clients' European banks (notably BNP Paribas) implemented time-intensive enhanced transaction monitoring to avoid sanctions risk.6 For Indian companies, the stakes for missteps are severe, ranging from fines to complete suspension of business with EU partners.
China
China's sanctions strategy has grown remarkably assertive and sophisticated. Far from being a passive recipient of Western restrictions, China now actively deploys blacklists, retaliatory measures, and industry-specific export controls. The "Unreliable Entities List" and export restrictions on critical minerals and technology, including gallium and graphite, are instruments of economic statecraft and strategic counter-pressure.7 Chinese countersanctions can complicate operations for global businesses across China and the West, requiring them to segregate supply chains and information flows carefully.
Indian firms are acutely affected by these shifts. For example, Reliance Solar and Tata Power Solar experienced immediate supply disruptions and price hikes after China imposed export bans on certain rare minerals needed for solar panels.8 Telecom majors Huawei and ZTE have faced stiff restrictions in India due to the convergence of international and domestic security sanctions, forcing India's telcos to diversify equipment sources.9 Similarly, Indian and Western companies now scrutinize all cloud service providers, such as Alibaba Cloud, to avoid the risks of Chinese data localization laws and potential countersanctions10. Collectively, these moves illustrate how China's regulatory muscle is restructuring international business relationships and compliance expectations.
India's Evolving Position
India is both a participant in and a target of global sanctions regimes. While New Delhi rarely imposes sweeping standalone bans, it enforces UN sanctions and uses targeted restrictions to safeguard national security, especially in defence tech and dual-use goods.
Indian companies must comply with global and domestic rules, including the Foreign Exchange Management Act (FEMA), Companies Act, and SEBI's Listing Obligations (LODR). Leading groups maintain dynamic sanctions checklists, escalate red flags, and regularly audit exposure best practices seen at Infosys, Tata Group, and Reliance Industries.
Maintaining neutrality while staying integrated with global markets demands agility and vigilance. Even rupee-denominated or local contracts are not immune to secondary sanctions risk.
Impact: How Sanctions Shape Business Realities
Sanctions rarely make headlines, but they force daily business changes overnight. When authorities update lists, firms like Reliance and Tata Motors must quickly adjust sources and routes, while Indian manufacturers face higher costs for inputs from China and Russia. Banks such as HSBC and SBI now scrutinize transactions closely, slowing trade and raising transparency demands.11 Business partners are chosen as much for compliance as performance, with pharma exporters like Cipla facing longer payment cycles and deeper vetting.12 In today's environment, a single sanctions listing can mean instant global isolation.
For Indian enterprises, challenges now include:
- Ripple Risks: In 2024, regulatory actions by the US and EU led to frozen accounts, blocked SWIFT access, and reputational fallout, even in unintentional cases.13
- Commodities & Energy: Majors like Reliance and Indian Oil Corporation use alternative payment arrangements to access Russian and Venezuelan oil, facing liquidity challenges and currency swings.14
- Manufacturing & Technology: Start-ups and established firms like Bharat Forge and Tata Advanced Systems must constantly reassess procurement and licensing, responding to tech restrictions from Russia and China.15
- Pharma & Healthcare: Exporters like Dr. Reddy's and Cipla contend with shipping delays and complex vetting when handling sanctioned countries, often relying on logistics partners like Maersk.16
- Financial & Digital Markets: Even minor compliance lapses can mean frozen assets or cancelled transactions, as banks rapidly enhance KYC and screening protocols.17
Gatekeepers like Adani Ports and international shippers MSC and Maersk have also tightened oversight, knowing that a single misdeclared container can now cause costly delays.18 In this era, sanctions compliance is a critical strategic priority.
Innovative Responses: What Indian and International Leaders Must Now Do
Resilience is now central in the boardroom, with sanctions readiness treated as a true strategic priority. Risk mitigation and seizing opportunities go together in today's regulatory environment. Top firms, in India and globally, are responding with:
- Real-time due diligence uses platforms like World-Check and Refinitiv to instantly identify sanctioned or high-risk parties.
- Supply chains are diversified, stress-tested, and alternative sourcing plans are ready to ensure resilience.
- Legal, compliance, and IT teams collaborate closely to track sanctions and respond rapidly to changes.
- Companies maintain contingency plans and run drills for the sudden loss of suppliers or banking partners.
- Ongoing industry engagement and clear communication keep employees and stakeholders aware of compliance protocols and emerging risks.
Firms that treat sanctions management as an ongoing leadership focus are turning compliance from mere cost into a competitive advantage and resilience.
Conclusion: Sanctions as the New Test of Global Leadership
Sanctions are the evolving boundaries of modern commerce. The essential question for India's global players is not "if" but "how" sanctions will shape strategy and success. Forward-thinking leadership makes risk awareness and compliance central to reputation, innovation, and growth.
By reacting rapidly, building awareness, and adopting well-informed strategies, Indian companies can weather the sanctions storm and emerge as trusted partners, for whom resilience and integrity set the standard.
Footnotes
1. U.S. Department of the Treasury – Sanctions Programs and Information
4. Reuters: Dr. Reddy's on U.S. sanctions compliance
6. Reuters: China's export controls impact
7. Reuters – China restricts exports of gallium and germanium, minerals used in chips and solar panels
8. Reuters – China export curbs on minerals hit global solar firms
9. BBC: India bans Chinese tech
10. The Diplomat: Changing China sanctions
11. EY – How tax and trade leaders can prepare for global tariff disruption
12. Mint – Pharma exporters face delays, stricter vetting amid global sanctions or Bloomberg – Banks tighten controls amid tougher sanctions
13. EY – How financial institutions can manage sanctions compliance
14. Reuters – Indian oil firms grapple with Russia payments
15. Economic Times – Manufacturers face hurdles amid global tech export curbs
16. Economic Times – Manufacturers face hurdles amid global tech export curbs
17. Bloomberg – Banks tighten controls amid tougher sanctions
18. The Economic Times – Maersk, others initiate stricter checks on sanctioned cargo
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
