India, publicly disdainful of sanctions to pressure Iran, has been left off a list of nations given a U.S. waiver from the measures, but is privately pushing its refiners for substantial cuts in imports from the Middle Eastern country.

The United States gave exemptions on Tuesday from its crippling financial sanctions to Japan and 10 EU nations it said had cut purchases of Iranian crude, but left Asian economic giants India and China exposed to the risk of such steps.

However, the 15 per cent cut sources say India is privately demanding from state-run refiners could help it qualify for such an exemption. Reuters' calculations show the overall cuts refiners are planning to make could be deeper at around 20 per cent.

"It's a sensitive matter," said a government official who declined to be identified because he was not authorised to speak to the media.

"You won't get to know. To keep it secret we are sharing information and minutes of the key meetings over the phone instead of exchanging or sending letters." Written communication that was sent has been tightly guarded.

"The letters were being sent like those in the British Raj," another government official said.

"Properly sealed with melted wax and in double envelopes as this is a very sensitive issue. Marked as 'To be opened by addressee only.'"

Indian state refiners planning to cut the size of their term deals with Iran have sought additional supplies from the world's top oil exporter, Saudi Arabia, and fellow OPEC member Iraq.

MRPL, India's largest Iranian oil buyer, plans to cut its imports by as much as 44 per cent to 80,000 barrels per day (bpd) for the fiscal year starting on April 1.

While these moves contrast with India's public stance that it is free to take oil on offer by Iran, one analyst said the government was lining up with the United States and the EU.

"This government...has arguably been more pro-U.S. than any other government has been," said Paranjoy Guha Thakurta, a political commentator in New Delhi.

"Despite its public position, the Indian government and its policies are aligned to the U.S. and EU."

STEPS BEHIND THE SCENES
The behind-the-scenes moves from India whose symbolic Taj Mahal was built for a Persian princess have not gone unnoticed by the United States.

"With respect to India, they are making steps that are heading in the right direction," U.S. Secretary of State Hillary Clinton told lawmakers in February.

"In fact, I think in a number of instances, the actions of countries and their banks are better than the public statements that we sometimes hear them making," Clinton said.

The U.S. sanctions target financial transactions with Iran and recent European Union measures also make shipping to and from the Islamic republic difficult as the western powers pressure Tehran over its nuclear ambitions.

Iran, the biggest oil producer in OPEC after Saudi Arabia and the world's fifth-largest oil exporter, says its nuclear programme is purely for peaceful purposes.

India has been dancing around the restrictions as its public stance implies it does not expect a waiver. Shippers are looking for sovereign guarantees for their vessels or for Iran to take on the freighting charges.

The latest twist in India's search for a way to pay for Iran's crude is a semi-barter arrangement using the rupee, which is not freely traded on global markets, for just short of half the imports - worth about $5 billion.

New Delhi hopes to take this opportunity to boost exports to Iran from around $2.7 billion last year, which could be paid for from the refiners' rupees - to be held in an account with UCO Bank, which has virtually no business with the United States.

But a recent trip by exporters to Iran to explore sales with rupee payment appears to have had little success, with deals for sugar and soymeal immediately afterwards sealed in dollars paid through middlemen in Dubai.

India has stayed in close contact with the United States at every turn in the tale, with a move to use Iran's privately-run Bank Parsian instead of Tehran's newly-sanctioned central bank coming hot on the heels of a diplomatic visit.

One of the industry sources said the request to switch banks came around the time that India's foreign secretary visited the United States in February.

"Iran is our immediate neighbour. We can't just go by the whims and fancies of the West," said Zikrur Rahman, a former diplomat and director of Delhi's Jamia Milia Islamia University.

"Can we ignore the lady buried in the Taj Mahal? No."