Washington India has failed to reduce its purchases of Iranian oil, and if it doesn't do so, President Barack Obama may be forced to impose sanctions on one of Asia's most important nations, Obama administration officials said Thursday.

A decision to levy penalties under a new US law restricting payments for Iranian oil could come as early as June 28, according to several US officials who spoke on condition of anonymity because of the sensitivity of the issue.

"Given the level of trade, and in particular oil, between Iran and India, targeting an Indian entity that facilitates Iran's access to the international financial market should be top of mind for the US Treasury," Avi Jorisch, a former Treasury Department official who is now a Washington-based consultant on deterring illicit finance, said in an interview.

The US law, which targets oil payments made through Iran's central bank, applies to any country that doesn't make a "significant" reduction in its Iranian crude oil purchases during the first half of this year.

If India fails to cut Iranian imports sufficiently, Obama may be compelled to bar access to the US banking system for any Indian bank processing oil payments through Iran's central bank, the US officials said.

While India hasn't asked its refiners to stop purchasing Iranian crude, the government has told processors to seek alternate supplies and gradually reduce their dependence on Iran due to increasing pressure from the US in recent weeks, three Indian officials with direct knowledge of the situation said.

No major reduction

India hasn't significantly cut imports this year because refiners' annual crude term deals with Iran typically run from April to March, they said.

The planned reductions will start only when new annual contracts begin next month, the Indian officials said, declining to be identified because they aren't authorised to speak to the media.

Trade: Third on the list

India bought an average of 328,000 barrels a day of Iranian crude in the first six months of last year, making it the No. 3 buyer, behind China and Japan and ahead of South Korea, according to the US Energy Information Administration. Iran is the No. 2 producer in the Organisation of Petroleum Exporting Countries.

The US government may not be aware that India's biggest buyer of Iranian oil, state-owned Mangalore Refinery & Petrochemicals Ltd., plans to import less from Iran starting next month, according to two officials.

— Bloomberg