India's exports to Iran set to fall further due to Dubai halt, US sanctions

India's Iran exports face fresh hurdles amid US sanctions and UAE trade halt

Indian exporters are bracing for further disruption to shipments of rice, tea, and pharmaceuticals to Iran, as planned new US sanctions and the United Arab Emirates' suspension of trade with Tehran threaten to sever the payment and logistics routes that have carried much of that trade in recent years. The Economic Times and the Jerusalem Post reported that bilateral trade has already fallen by more than 90% from its 2018/19 highs of $17 billion, leaving India among Iran's five largest trading partners but with exports limited mostly to goods exempted on humanitarian grounds.

The United Arab Emirates last week suspended all trade activities, exchanges, and financial transactions with Iran until further notice, according to the reports. Indian exporters fear US President Donald Trump's proposed 'economic D-Day' plan — likely to be unveiled later on Monday — could further squeeze trade already weakened by sanctions, banking caution, and shipping constraints.

Most Indian exports to Iran have relied on Dubai's port in recent years, the sources said. Dev Garg, vice president of the Indian Rice Exporters Federation, said transactions and payment mechanisms traditionally routed through the UAE are already exploring alternative jurisdictions, with Turkey emerging as a suggested alternative. He noted that any prolonged disruption could have a greater bearing on the basmati industry, particularly for millers and exporters in northern India.

Until recently, Indian exporters typically received payment through an Indian authorised-dealer bank from a UAE trader's account — in dirhams, dollars, or another permitted currency — while the trader separately collected payment from its Iranian customer through legally compliant channels. That mechanism is now under strain, according to the reports.

Trade volumes and commodity breakdown

In the first half of 2026, India exported $383.11 million of rice to Iran, making it the second-largest overseas market for premium rice, including long-grained basmati. Separately, for the financial year ended March, rice accounted for $810.08 million of the $1.25 billion in exports to Iran, according to government data reported by The Economic Times. That compares with India's $11.5 billion in overall rice exports during that year.

Indian tea exports to Iran totalled $14.34 million in the first half of 2026, according to the reports. Prabhat Bezboruah, a senior tea planter and former chairman of the state-run Tea Board, said sales will be affected as a lot of that trade goes through the UAE.

Iran's exports to India, meanwhile, are dominated by crude oil, valued at about $707 million in the first half of 2026, with smaller shipments of liquefied petroleum gas, apples, dates, almonds, and kiwi fruit. Officials quoted in the reports said crude oil imports were largely enabled by a US exemption granted earlier this year and may be difficult to sustain.

Conflicting outlooks

While the disruptive scenario that described the impact of US sanctions and the UAE halt is stressing, the reports also contained a noticeably different perspective. According to The Economic Times, stricter US sidelined sanctions are unlikely to significantly affect India's exports, because bilateral trade is largely limited to pharmaceuticals and agricultural products, particularly basmati rice. The paper cited Ajay Bhalothia, general secretary of the All India Rice Exporters Association, as saying that demand from Iran held up despite higher prices and months of disruption from the US-Iran war. He noted that exporters shipped almost 60% of basmati rice production to Iran and a few other Middle East nations since the war began, and that Iranian buyers have been purchasing for 'food security reasons'.

Bhalothia also said that importers and exporters have developed payment networks in Dubai and the wider UAE, Germany, China, and most recently Turkey, and that these transactions have not faced disruptions so far. That optimism contrasts with Dev Garg's more cautious tone, who suggested that alternative payments are being explored.

India has not imported any crude from Iran since 2019, except for a small window this year due to US waivers, according to The Economic Times. Before the sanctions, India had long-standing ties with around the nation, with Tehran among its biggest oil suppliers.

Exporters adapt but face higher costs

The reports quoted a New Delhi-based exporter as saying that direct shipments could rise, but payment problems may worsen. Ajay Srivastava: a representative at the Global Trade Research Initiative, said India's Iran trade has already fallen sharply since previous sanctions, and that although food and pharmaceutical products may receive exemptions, exporters could still face higher freight, insurance, and payment costs.

There was no immediate comment from India's trade and foreign ministries.

Perspectives

• Indian Rice Exporters Federation (via Dev Garg): Warns of severe disruption to the basmati trade and of possibly needing to route transactions through alternative jurisdictions like Turkey.
• All India Rice Exporters Association (via Ajay Bhalothia): Downplays the impact, insisting that payment networks in Dubai, Germany, China, and Turkey have not yet faced disruptions, and that Iranian demand for basmati remains robust even at higher prices.
• Global Trade Research Initiative (via Ajay Srivastava): Stresses that India's Iran trade has already contracted sharply, and expects exemptions for food and pharmaceuticals but higher logistics and payment costs.