EXCLUSIVE-UPDATE 1-India to cut Iran oil imports 2013/14-sources

Nidhi Verma

* India plans to cut Iran oil imports 10-15 pct

* Refiners will cut more if Iran fails to reduce prices

* Bankers not issuing short-term dollar loans for Iran oil

(Adds Japan cut plan according to top refiner, releads)

NEW DELHI, Dec 19 (Reuters) - India plans to cut oil imports

from Iran by 10 to 15 percent in the next fiscal year, and more

if Tehran does not lower prices to help cover higher costs

resulting from Western sanctions, a government source said.

Iran's top Asian oil buyers - China, India, Japan and South

Korea - have all reduced imports after the United States and the

European Union imposed sanctions aimed at curbing Tehran's

nuclear ambitions.

The sanctions have more than halved Iran's oil exports this

year, costing Tehran up to $5 billion a month in lost revenue.

"Next year our imports will be 10 percent to 15 percent less

than this year," said a government official with direct

knowledge of the matter, who declined to be identified because

he is not authorised to speak to the media.

"If they don't cut prices, the decline will be substantial.

Indian refiners have genuine problems with credit availability."

India, the world's fourth-biggest oil importer and Iran's

second-biggest client, relies on outside supplies for 80 percent

of its oil needs, or about 3.5 million barrels per day (bpd).

Officials at state refiners said they had yet to receive any

directive from the government to cut imports from Iran in the

year beginning April 2013, when annual contracts start.

But refiners would probably cut imports anyway because of

high costs, the officials said.

The push for cheaper prices is similar to a move by Chinese

refiner Sinopec, Iran's biggest buyer, last year. As

rising international pressures forced other buyers out of the

market for Iranian oil, Sinopec strong-armed Iran into giving it

better terms for its annual oil purchases.

The United States wants importing countries to make further

cuts in purchases from Iran in 2013 to avoid sanctions, a State

Department source said this month.

South Korea has already told the United States it will cut

imports by about a fifth from a year earlier in the six months

to May, government and industry sources said this month.

On Wednesday, Japan's top refiner said the country's crude

oil imports from Iran would be about 15 percent lower next year.

There is no clear indication yet on 2013 imports by China.

Daily imports into China in the first 10 months of 2012 were

down 22 percent on the 2011 figure.

For the current fiscal - and contract - year, New Delhi had

asked refiners to cut purchases from Iran by 15 percent.

Refiners have bought more from Saudi Arabia, the top supplier,

and Iraq, pushing Iran out of the number two slot.

Banks have refused to issue short-term dollar credit, also

known as buyers' credit, for Iranian oil imports because of the

sanctions, officials at refiners said.

Indian refiners say Iranian crude has become more expensive

because sanctions force them to borrow at high domestic interest

rates to finance purchases and face continuing volatility in the

rupee against the dollar.

"Economically Iranian oil is not viable. My borrowing cost

has gone up," an official at a state-run refiner said.

Starting on Feb. 6, U.S. law will prevent Iran from bringing

home its oil export earnings, a measure that will lock up a

substantial amount of Tehran's funds, U.S. officials have said.

That could affect the continuation of India's existing

payment system with Iran, which settles 55 percent in euros

through Turkey's Halkbank. The rest is settled in

rupees through a local bank.

(Reporting by Nidhi Verma; Editing by Simon Webb and Jane