India defies sanctions, won't cut Iran oil imports

MUMBAI, India – India will not cut back on oil imports from Iran, its finance minister said, despite stiff new U.S. and European sanctions designed to pressure Tehran over its nuclear program.

"It is not possible for India to take any decision to reduce the import from Iran drastically because, after all, the countries which can provide the requirement of the emerging economy, Iran is an important country amongst them," India's finance minister Pranab Mukherjee told reporters Sunday in Chicago.

Iran exports 2.5 million barrels of oil per day, about 3 percent of world supplies. About 500,000 barrels go to Europe and most of the rest goes to China, India, Japan and South Korea.

China -- which counts on Iran as its third-biggest oil supplier -- has rejected sanctions and called for negotiations over Iran's nuclear program. Japan is mulling the details of the sanctions, while South Korea has been non-committal.

The European Union last week imposed an oil embargo against Iran and froze the assets of its central bank. In December, the U.S. said it would bar financial institutions from the U.S. market if they do business with Iran's central bank.

About 12 percent of India's oil imports reportedly come from Iran, making Iran its second-largest supplier after Saudi Arabia.

Western sanctions could make it harder for India to pay for the oil it gets from Iran. Past sanctions have already delayed payments by Indian oil importers, who have had to scramble to find banks willing to handle transactions with Iran.

India's central bank governor D. Subbarao said last week that the current payment mechanism was "working fine," though India was also "exploring other options," which he declined to discuss.

The U.S. and its allies believe Iran is using oil revenues to develop nuclear weapons, but Tehran insists its nuclear program is purely for peaceful purposes.