National Iranian Oil Co (NIOC) has said it will cut supplies for Indian clients in August if the two countries have still not found a way to make payments for the oil, three industry sources said on Friday.
NIOC told refiners of the deadline on the more than six-month old dispute in a letter dated June 27 to Indian refiners, the sources, who requested anonymity, said.
"We regret to inform you that NIOC would hardly be in a position to deliver the Iranian crude oil to our partners in India ... in August 2011 unless concrete solutions are worked out for remittances of NIOC's dues," the letter said, according to two sources who have seen the letter.
NIOC added in the letter that "high-ranking delegates from banking, financial and oil sectors of both countries are presently devoting a great deal of effort to settle the matter," according to the sources.
Iran is India's second-biggest crude supplier after Saudi Arabia, exporting about 400,000 barrels per day or 12% of the fast-growing Asian country's needs, worth some $12 billion a year.
Iran, facing increased isolation internationally, and rising global player 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.