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Tue 19 Jul 2011 08:00 AM

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Iran warns of oil export ban if India doesn’t pay up

Persian state says it is owned $5bn from India for oil supplies in recent months

Iran warns of oil export ban if India doesn’t pay up
Iranian caretaker Oil Minister Mohammad Aliabadi and Irans First Vice President Mohammad Reza Rahimi

Iran warned India on Monday that it would stop exporting oil
to India from August 1 if a financial dispute over payment was not resolved,
the semi-official Fars news agency reported.

"Iran might stop giving permission to export its oil to
India from August 1 if the dispute over receiving payments from India is not
resolved," an unnamed oil official told Fars.

National Iranian Oil Co (NIOC), the state oil firm that
supplies around 12 percent of India's oil imports, set the deadline in a letter
dated June 27 to Indian refiners, sources said in early July.

The official told Fars that the letter was not sent officially
by NIOC.

"The [previous] warning was not sent by NIOC officially
and it was not a warning over stopping exports to India completely," the
official told Fars.

An official at a state-run refiner said his company had not
had word from Tehran.

"So far we have not received any fresh letter from Iran
threatening to stop supplies from August," said the official. "Last
we heard from them on this issue was in June."

Iran, facing increased isolation internationally, and
energy-hungry India have been looking to resolve an impasse triggered in
December when the Reserve Bank of India ended a regional clearing mechanism
under US pressure.

Analysts say Iran is putting pressure on India to accelerate
the resolution of the payments mechanism dispute.

Iran says India owes it $5bn for oil imports in recent
months. Earlier this year, Germany allowed India to pay for the oil via
Hamburg-based EIH bank, which handles international trade for Iranian
companies.

But India halted that conduit in early April after
discussions with German Chancellor Angela Merkel, and EIH has since come under
EU sanctions.