In a bid to cover insurance as sanction loom, Chennai Petroleum cancelled Iranian crude oil imports from October, reported Economic Times. India has increased oil purchases from Iran to almost pre-2012 levels after sanctions were lifted, and in May 2016 India agreed to transfer to Iran about $6.5 billion that it owed for Iranian oil shipments but which was held up for payment due to sanctions, it said.
"From the point of view of stable petroleum supplies, we are still hoping to ask the government to negotiate tenaciously with the USA government to achieve an exemption for Japan from its sanctions against Iran", Tsukioka said.
In May, US President Donald Trump withdrew from a 2015 nuclear accord with Iran and ordered the renewal of US sanctions.
United India Insurance has informed Chennai Petroleum that its new annual policy that is set to take effect from October will not cover any liability related to processing crude from Iran, the three sources said.
India does not have a direct impact of the sanction but the country is looking for safeguard against the risk in the Western reinsurance market, which is against Iran.
Chennai Petroleum's reduced demand will further cut India's imports from Iran to about 10 million tons in October, lower than previous estimates reported by Reuters. The Trump Administration has said, "Either you can do business with Iran or with us".
"Reinsurers have said they cannot provide full 100 percent cover. They have agreed to provide support for only 85 per cent cover." reported an anonymous source to Economic Times.
The US has told India and other countries to cut oil imports from the Gulf nation to "zero" by November 4 or face sanctions.
He said that the matter figured in the discussions during the first ever India-US 2+2 Ministerial Dialogue in New Delhi on September 6 in which External Affairs Minister Sushma Swaraj, Defence Minister Nirmala Sitharaman, US Secretary of State Mike Pompeo and Defence Secretary Jim Mattis participated.
With Chennai's absence, Iran is left with just two Indian clients, Managalore Refinery and Petrochemicals Ltd, and IOC.
However, India has been appraising the U.S. about its energy demand to fuel its economy as well as the importance of Iranian oil.
State-owned refiner Hindustan Petroleum Corp has already halted purchases due to insurance problems, while Bharat Petroleum Corp boosted Iranian purchases earlier this year and expects to sharply cut Iranian flows once the sanctions take effect.