Sanctions and Sovereignty: How India is Redefining Economic Autonomy in a Weaponised World

The world economy rediscovered an old truth in a new form when sanctions became the West’s first line of defence after Russia invaded Ukraine in 2022: interdependence can both empower and constrain. In 2025, the boundaries of sovereignty are being redrawn as sanctions stretch beyond traditional warfare into technology, finance, and logistics.

India, a country situated at the intersection of multiple geopolitical systems yet refusing to be bound by any, represents this redefinition better than most. For India, sanctions have not meant retreat; they have instead triggered resilience, creativity, and quiet defiance.

From Discounts to Dependencies

India’s engagement with Russian crude oil since 2022 captures the fine line between strategic vulnerability and economic opportunity. By mid-2025, India had become one of the world’s top importers of Russian oil, bringing in about 1.6 million barrels a day. The result was striking: inflation remained under control, and import savings reached approximately $10 billion in 2024.

Yet this success story revealed its own risks. When the European Union announced plans to phase out fuels refined from Russian crude by 2026, it sent ripples through Indian refinery hubs from Jamnagar to Visakhapatnam. Nearly 15 billion dollars’ worth of Indian exports to Europe suddenly appeared at risk. At the same time, new US sanctions on major Russian producers forced Indian refiners to rework their contracts and diversify their sourcing strategies.

What had started as a discount was now becoming a dependency. India’s planners are therefore rebalancing the equation by combining cheaper Russian barrels with expanded imports from the Gulf, Africa, and Latin America, while rapidly scaling renewable energy. By 2025, renewables will already make up almost 44 per cent of India’s installed power capacity. The message is clear: true energy security lies in diversity, not dependence.

Chabahar and the Diplomacy of Persistence

India’s idea of sovereignty extends well beyond energy, finding expression in its infrastructure diplomacy. The Chabahar Port in Iran, meant to give India access to Afghanistan and Central Asia, has long existed in a sanctions-laden grey zone. It was possible that India's investment would have ended when Washington revoked its waiver for the project in the middle of 2025. But by October, after careful negotiations, India secured a fresh six-month exemption and kept operations running.

This wasn’t just a bureaucratic victory; it was a lesson in strategic patience. Instead of confronting US sanctions head-on, New Delhi aligned the port’s objectives with Washington’s own goals—stability in Afghanistan, counter-terrorism logistics, and regional connectivity. It was diplomacy by quiet design, not defiance. Chabahar today stands as a symbol of how developing nations can navigate the politics of power without surrendering their sovereignty.

Currency and Digital Sovereignty

If energy and connectivity are the visible faces of autonomy, finance is its foundation. The weaponisation of global finance — asset freezes, banking restrictions, and payment bans — has made countries rethink how they transact across borders.

India’s approach has been both innovative and grounded. The rupee–dirham settlement channel with the UAE has allowed billions of dollars in energy trade to bypass the dollar system. Meanwhile, the Unified Payments Interface, once a domestic marvel, is now accepted in more than ten countries, including France, Singapore, and Mauritius. It enables real-time payments in local currencies without relying on SWIFT.

The Reserve Bank of India’s digital currency, the e-rupee, has also moved from pilot to early adoption, with millions of users and merchants already on board. Discussions are underway with Singapore and the UAE to test cross-border settlement using digital currencies. Each of these initiatives chips away at old monopolies and expands India’s financial freedom. It isn’t a rejection of the global system but rather the creation of new pathways within it — a bilingual economy fluent in both rupees and dollars.

The Doctrine of Multi-Alignment

At the heart of India’s economic statecraft lies the doctrine of multi-alignment. This is not a return to Cold War-era non-alignment, nor is it blind alignment with any one bloc. It is a deliberate choice to preserve flexibility across finance, energy, defence, and technology.

India buys oil from Russia, Saudi Arabia, and the United States. It builds Chabahar in Iran while championing the India-Middle East-Europe Economic Corridor linking Mumbai to Piraeus. It strengthens defence ties with France and the US, while continuing co-production with Russia. In finance, it uses rupee and UPI corridors, where strategic and dollar channels where effective. The guiding idea is simple: no single relationship should be indispensable, and no external actor should hold veto power over India’s decisions.

How Others See India’s Strategy

Global observers have taken note of India’s balancing act. Many economists and policymakers argue that India has managed to walk the tightrope better than expected. Energy Minister Hardeep Singh Puri has often stated that India can manage any supply squeeze by widening its sourcing network — now stretching from Latin America to the Atlantic Basin.

International scholars see India’s approach as a masterclass in navigating “weaponised interdependence”, where nations use financial and technological networks for coercion. By building parallel systems without abandoning global integration, India is rewriting the playbook on modern sovereignty.

Foreign Minister S. Jaishankar has defended India’s stance with characteristic bluntness: “We will buy where it serves our national interest.” His words capture the spirit of a foreign policy that values engagement on its own terms rather than on terms dictated by others.

The Debate: Vulnerable or Victorious?

Not everyone sees India’s path as risk-free. Critics argue that heavy reliance on discounted Russian oil and refined exports to Europe exposes India to secondary sanctions or disruptions in shipping and insurance. Any tightening of Western restrictions could increase costs and complicate refinery economics.

Supporters, however, believe India has turned pressure into power. By capitalising on discounted barrels, building its own payment channels, and promoting rupee-based trade, India has cushioned itself from global shocks. The Indian economy has remained stable, inflation moderate, and growth among the fastest in the world — clear signs that the country is not merely surviving but evolving through crisis.

The Darker Side: What If Sanctions Escalate?

The picture is not without shadows. If sanctions were to intensify, India could face shipping bottlenecks, payment delays, and higher compliance costs. The dollar’s dominance would still pose liquidity risks for Indian refiners, and over-reliance on alternative networks could invite geopolitical blowback.

There’s also the risk of overextension. Building parallel corridors and payment systems demands huge investment and political capital. The Chabahar experience shows how easily projects can be delayed by external politics. The challenge for India is to ensure that resilience does not become overreach.

Comparing India with Other Powers

China and Russia offer contrasting models of response. China has promoted its Cross-Border Interbank Payment System and encouraged the use of the yuan in trade settlements, but convertibility limits its reach. Russia built its own systems like MIR and SPFS after being cut off from Western finance, but these remain confined largely to friendly nations. India’s approach differs—it doesn’t seek isolation. Instead, it builds complementary channels that sit within the global order yet preserve room for manoeuvre.

The Way Forward: What India Should Do

Looking ahead, India can take several concrete steps to strengthen its autonomy. First, codify energy redundancy by ensuring diversified crude contracts across multiple regions and establishing rapid-response plans for sanctions shocks.

Second, expand rupee-based trade settlements and scale up UPI acceptance abroad, while carefully piloting cross-border digital currency experiments.

Third, hedge refinery exports by developing new markets in Africa and Latin America, reducing reliance on Europe.Fourth, invest in robust compliance and monitoring systems to shield private refiners and banks from sanctions risk.Finally, manage global narratives by highlighting how India’s diversified energy and financial systems contribute to overall global stability.

What Success by 2030 Could Look Like

By the end of this decade, India’s success will be measured by how well it turns interdependence into strategic leverage. A diversified energy basket, renewables exceeding half of installed capacity, and seamless trade corridors from the Arabian Sea to the Mediterranean would signal progress. UPI could evolve into a global standard for affordable real-time payments, while the e-rupee may emerge as a trusted cross-border settlement layer among friendly central banks. Most importantly, multi-alignment could mature into a recognised model of 21st-century diplomacy — one that blends moral autonomy with pragmatic engagement.

Conclusion

The world today no longer talks of free markets but of friend-shoring. Efficiency has given way to resilience as the defining goal of globalisation. Amid this transformation, India stands out as a nation determined to write its own rules.

Its approach to sanctions and sovereignty is not one of defiance but of design. Through diverse partnerships, alternative payment systems, and nuanced diplomacy, India is proving that autonomy in the modern age is not about isolation—it is about participation on one’s own terms.

In an era when power flows more through data, currencies, and digital networks than through armies, India’s experiment with economic sovereignty may well become its most enduring export to the world.