In a diplomatic blow for India, the US Treasury Department has imposed economic sanctions, possibly for the first time, against an Indian petrochemical company for allegedly “purchasing millions of dollars’’ worth of Iranian petrochemical products for onward shipment to China.

While the US action underpins the need for India to transit to a rupee-trade mechanism with as many trading partners as possible, the strong diplomatic messaging makes it difficult for the country to resume oil trade with Iran, by re-activating the rupee payment mechanism, before the US and Iran come to a settlement on the nuclear deal (Joint Comprehensive Plan of Action), sources said.

“As Iran continues to accelerate its nuclear program in violation of the JCPOA, we will continue to accelerate our enforcement of sanctions on Iran’s petroleum and petrochemical sales... These enforcement actions will continue on a regular basis, with an aim to severely restrict Iran’s oil and petrochemical exports. Anyone involved in facilitating these illegal sales and transactions should cease and desist immediately if they wish to avoid US sanctions,” a statement by the US Department of Treasury said on Thursday.

Sanctions have also been imposed on firms from the United Arab Emirates, Hong Kong and China.

‘Unpleasant surprise’

“The US sanction against the Mumbai-based company Tibalaji Petrochem Private Limited has come as an unpleasant surprise for India as the goodwill between the two countries had so far ensured that no action was initiated against any Indian company so far either for trading with Iran or Russia. The US looked the other way even when India went ahead with the S-400 deal with Russia. But now it seems India will need to be more careful,” a source pointed out.

The Ministry of External Affairs has not come up with an official reaction to the move yet. The sanctions have been imposed just after the conclusion of External Affairs Minister S Jaishankar’s US visit where he criticised Washington’s decision to provide a sustenance package for Pakistan’s F-16 fleet.

“The US excels in making local problem between two countries a global issue. The strong-arm tactics is not supported by international law or convention. India needs to move away from SWIFT and also possibly form a coalition of like-minded countries to put in place alternatives,” said policy analyst Ajay Srivastava.