India asks refiners to cut Iran oil imports ahead of Obama visit

India has asked its refiners to slash oil buys from Iran in the next two months to keep the imports in line with the previous fiscal year's levels, sources with knowledge of the matter said, days ahead of President Barack Obama's visit to New Delhi.

India, the second-largest buyer of Iranian oil, has raised its crude shipments from there by more than 40 per cent over the first nine months of the current fiscal year, when as part of the temporary deal that eased some sanctions on Tehran it was meant to hold them steady.

Now, the sources said, India's oil ministry has told Essar Oil, Mangalore Refinery and Petrochemicals Ltd and Indian Oil Corp -- the Indian refiners that buy from Iran -- to cut those imports to keep the annual figure in line with the nuclear deal.

"This is very much about US pressure. India does not want Obama's visit to be overshadowed by some dispute over sanctions," said Robin Mills, head of consulting at Dubai-based Manaar Energy.

"India is encouraging its companies to cut back on imports because the US demand has been that countries taking Iranian oil should not increase purchases from 2013 levels," he said.

Still, India's imports from Iran rose to 250,200 barrels per day (bpd) in April-December last year, up 41 per cent compared with the same period in 2013, according to tanker arrival data made available to Reuters.

China, Tehran's biggest oil client, has also increased its oil imports from Iran over the last year by about 30 per cent. But with reduced purchases from Japan and South Korea, the other main buyers of the oil, Iran's exports to Asia are holding around 1 million to 1.1 million bpd.

That's about half of Tehran's total exports before toughened sanctions aimed at its nuclear activities were put in place in 2012, and a level U.S. officials have said is allowed under the temporary deals that have eased some of the measures and given Iran access to some of its frozen oil revenues.

Iran and six major world powers are due to meet next month to narrow differences over Tehran's nuclear programme after making limited progress earlier in January to clinch a more permanent agreement by a June 30 deadline.

Cutting oil imports February-March

During Obama's visit, the United States will update India on the progress of the Iran nuclear negotiations, Ben Rhodes, deputy national security advisor in the White House told reporters in a teleconference call.

India's higher imports from Iran would also be on the agenda, said the two sources in India, who did not want to be named because of the sensitivity of the issue.

"The refiners will have to virtually halt Iranian oil imports in February-March to retain purchases at last year's levels," said one of the sources.

Essar, the biggest Indian buyer of Iranian oil, has already said it will not be taking any of the oil over the next two months, said this source, while IOC has said its buys from Iran will be slightly less in the year to March 31, 2015, than in the previous fiscal year.

"MRPL may have to arrange oil from elsewhere as it was planning to lift 100,000 bpd from Iran this year," the source said.

State-run MRPL has issued a rare spot tender seeking supplies of 1 million barrels of high sulphur oil for lifting during March 1-10, a tender document seen by Reuters shows.

"We are also in talks with other suppliers in the Gulf like Kuwain, ADNOC and Saudi to get additional supplies under our term contract," an MRPL, source who did not wish to be named said.

MRPL and Essar declined to comment on any government requests to cut purchases from Iran. IOC's finance head did not respond to phone calls.

"India has cooperated with us in the enforcement of our sanctions regime, which continues to put a significant amount of pressure on the Iranian government and the economy," Rhodes said in the teleconference call.

Last week, sources in India's oil ministry said India will also press the United States during Obama's visit to remove three Indian oil companies from a list naming firms doing business in Iran, and use the opportunity to seek priority access to US LNG exports.

The US president will arrive in New Delhi on Jan. 25 and hold discussions with Prime Minister Narendra Modi, who visited Washington in September.