India's crude imports from Iran fell 40 percent in the first nine months of this year as some refiners cut purchases from the sanctions-hit nation while waiting for New Delhi to back local insurers covering plants processing the oil, Reuters reported.
European reinsurers, due to Western measures targeting Iran's disputed nuclear programme, have added a clause in contracts with Indian refiners that could mean claims arising during the processing of Iranian oil would not be met.
New Delhi has decided to set up a sovereign fund to back local insurers covering such refineries, hoping to boost imports paid for in rupees to ease its current account deficit.
But the fund has yet to start and this could lead to import cuts larger than the goal of about 15 percent.
Despite a near doubling of Iran oil shipments from August as one refiner stepped up purchases, the year-to-date volumes are still down sharply from a year ago.
India's imports of Iranian oil have fallen to 194,000 barrels per day (bpd) for January-September, down from 324,000 bpd in the same period last year, trade data made available to Reuters shows.
September barrels from Iran rose to 296,100 bpd from 151,000 bpd in August, partly due to Indian Oil Corp (IOC.NS) taking 2 million barrels of oil from Tehran, the data showed.
The September volumes were down 8.1 percent from a year ago.
Despite signs of a thaw in relations between Washington and Tehran, Iran's Asian oil buyers - its main clients - are not ready to risk letting imports creep higher.
To win waivers from the U.S. sanctions, Iran's oil customers must continually reduce their shipments. Japan won its fourth six-month waiver last month, while Iran's other top buyers - China, India and South Korea - will have their exemption from sanctions reviewed in early December.
Iran's oil sales in October will fall to their lowest in months, according to sources who track tankers, indicating no sanctions relief to Tehran despite its apparent willingness to compromise on its disputed nuclear work.
Iran's deputy foreign minister said he had made proposals to the U.N. nuclear watchdog chief on Monday after pledging "a new approach" to easing international concerns about Tehran's nuclear programme.
GAINING GROUND
Overall shipments in June-September were about 34 percent less than the average of December-May period, the data shows.
The comparison with the previous six months will be most relevant to the renewal of India's sanctions waiver in December.
Refiner Mangalore Refinery and Petrochemicals Ltd (MRPL.NS) was the biggest importer of Iranian oil in September, replacing Essar Oil (ESRO.NS) by shipping in 133,000 bpd, the data showed.
MRPL resumed imports from Iran in August after a four month halt over the insurance issue, while Hindustan Petroleum Corp Ltd (HPCL.NS) has decided against buying oil from Tehran in the fiscal year that began April 1.
Iran was the fourth biggest crude oil supplier to India in September, improving its ranking from ninth place in August.
India imported about 51 percent more oil from Latin America in the first nine months of the year as the Iranian shipments dropped. Crude imports from Iraq over the same period increased by 20 percent.
Overall, Asia's third-largest economy shipped in slightly more oil in September than a year ago, while imports for the January-September period rose about 11 percent, the data showed.