Two Indian refiners will not get Iran oil in Aug-sources

Reuters - Two Indian refiners will not get crude from Iran in August, sources at the two companies said on Thursday, as Tehran carried out a threat to stop supplies after debts in a long-running payments dispute reached more than $5 billion.

Since December, India and Iran have struggled to find ways for New Delhi to pay for 400,000 barrels per day or 12 percent of India's imports after the Reserve Bank of India halted a clearing mechanism under U.S. pressure.

The move won praise from Washington, which is using sanctions in a bid to get Tehran to halt its nuclear programme.

While Iran has told one of the refiners there will be no supplies in August, the other has made alternative arrangements as it heard nothing from the Islamic Republic after a letter on June 27 threatening to halt supplies.

"Since there was no communication from Iran after June 27, we assumed there would not be any supplies in August and accordingly made arrangements. They have not made any allocation for us," said one of the sources, who declined to be identified as they are not authorised to speak to the media.

Iran is India's second-biggest supplier and refiners had already turned to top exporter Saudi Arabia and the United Arab Emirates for extra barrels to replace those at stake.

Saudi Arabia said it would boost supply unilaterally to meet rising global demand after an OPEC meeting in June failed to agree to raise output, with opposition led by Iran.

India is Iran's second-largest oil buyer after China and Tehran has been exporting oil to India, despite receiving no payment for months, to protect its market share.

Tehran has already given refiners in China notice of their cargoes for August, two Chinese buyers of Iranian crude said, adding that Iran has so far not offered them additional August volumes.

Indian refiner Mangalore Refinery and Petrochemicals Ltd , Iran's biggest Indian client, had already flagged that Tehran supplies were vulnerable in the long term.

"Considering the enhanced level of sanctions against Iran in future, the non-resolution of the current payment crisis, the availability of Iranian crude may be difficult," MRPL said in its annual report, adding supply may not continue indefinitely.

U.S. treasury officials are working with India to end the impasse and a solution is in sight, a U.S. official said on Wednesday as Secretary of State Hillary Clinton visited India.