It is now seeking support from allies to cut Iranian oil imports to zero soon after the sanction on the petroleum sanction commences in November.
Iran is an important supplier of oil to Japan, accounting for about 5 percent of its crude imports, and Japanese refiners, together with the government, will try to maintain its good relationship with the Middle Eastern country, said Tsukioka, adding that the US sanctions will not cause a major impact.
Sources said while India is in touch with both Iran and the USA on the complex issue, it is banking upon the European Union stance to explore an alternative mechanism of payments.
Iran is India's third-largest oil supplier behind Iraq and Saudi Arabia.
Under the process, India used to pay in euros to clear 55% of its dues through Halk bank based in Ankara. "We have to mutually decide the number", said the first source.
The port facilitates access to Afghanistan by bypassing Pakistan and is also a vital link in the International North-South Transport Corridor.
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UCO Bank and IDBI Bank have been identified to route the payment as the two have no exposure to the U.S. financial system. India has said that the implementation of Joint Comprehensive Plan of Action (JCPOA) sanctions relief in January 2016 paved the way for work to begin in earnest on the Chabahar project.
Earlier, India was looking at the possibility of falling back on the rupee-rial arrangement for importing oil from Iran in the wake of USA sanctions.
Many refiners in Japan, the world's fourth-biggest oil consumer, say they are resigned to completely halting imports from one of their historically important suppliers, unlike during a previous round of sanctions when they only reduced imports from Iran.
The official said refiners have booked oil cargoes from Iran for the current month as well as for October. India can not use the existing payment mechanism since the United States under Donald Trump has opted for the renewal of sanctions on Iran, which will affect the banking sector and oil payments from November 4.
Besides blocking of banking channels from November, the absence of payment mechanism may pose a challenge to the transportation of the oil as Iranian crude is bought on a CIF basis and shipped on Iranian tankers.
But the actual volumes imported may be far less as companies like Reliance Industries have totally stopped buying oil from Iran and others too are scaling it down in hope of winning a sanction waiver from the US.