Indian refiners are considering one-year contracts with Kuwait, Iraq and Saudi Arabia to move from Iranian crude, sources told Bloomberg News on condition of anonymity.
Ehsan Ul-Haq, a market consultant at British firm KBC Energy Economics, told Bloomberg the emerging switch shows sanctions are having an effect on Iran, a member of the Organization of Petroleum Exporting Countries.
"This shows how pressure on Iran is increasing, and why Iran's tone is much more conciliatory in recent times," he said. "Iran might be willing to accept a few more conditions now because otherwise it will find it difficult to meet its budget obligations."
India imported around 171 million tons of crude oil for the year ending March 31, 2012. If India stops buying Iranian crude oil altogether, Bloomberg estimates that Iran could lose about $11.5 billion in annual sales.
India received a sanctions waiver from the U.S. State Department in December for reducing the amount of crude oil purchased from India.