Malaysian Prime Minister Mahathir Mohamad said on Tuesday he would not retract his criticism of New Delhi's actions in disputed Kashmir despite Indian traders calling for an unprecedented boycott of Malaysian palm oil.
The impasse could exacerbate what Mahathir described as a trade war between the world's second biggest producer and exporter of the commodity and its biggest buyer so far this year.
India's top vegetable oil trade body on Monday asked its members to stop buying Malaysian palm oil after Mahathir said at the U.N. General Assembly last month that India had "invaded and occupied" Kashmir, a disputed Muslim-majority region also claimed by Pakistan.
Indian Prime Minister Narendra Modi's government removed the long-standing autonomy of India's portion of the Kashmir valley on Aug. 5, calling it an internal matter and criticising countries that have spoken out against the move.
"We speak our minds, and we don't retract or change," Mahathir told reporters outside parliament. "What we are saying is we should all abide by resolutions of the (United Nations). Otherwise, what is the use of the U.N.?"
The U.N. Security Council adopted several resolutions here in 1948 and in the 1950s on the dispute between India and Pakistan over Kashmir, including one which says a plebiscite should be held to determine the future of the region.
Mahathir said Malaysia would study the impact of the boycott called by the Mumbai-based Solvent Extractors' Association of India and look at ways to address the issue.
New Delhi has so far refused to comment on the trade spat.
"This is not the Indian government, so we have to find out how we can communicate with these people, because trade is a two way thing and it is bad to have what amounts to a trade war," Mahathir said.
Malaysia's exports to India were worth $10.8 billion in the fiscal year that ended on March 31, while imports totalled $6.4 billion, according to Indian government data.
Malaysian palm oil futures slipped on Tuesday over concerns demand would fall from India.
India was Malaysia's third-largest export destination in 2018 for palm oil and palm-based products worth 6.84 billion ringgit ($1.63 billion).
Malaysia said last week it was considering raising imports of raw sugar and buffalo meat from India, in a bid to ease the trade tensions.
India, the world's biggest importer of edible oils, also buys palm oil from Indonesia as well as soyoil from Argentina and Brazil, and sunflower oil from Ukraine.