NEW DELHI - India is exploring the option of routing payments for the crude oil it buys from Iran through Russia, a senior Indian official said, indicating to the three-day visit of Prime Minister Manmohan Singh to Moscow.

Indian Foreign Secretary Ranjan Mathai also told reporters in New Delhi that Iran is crucial to India's energy security. 

"The importance we attach to our energy security, the fact that a very large amount of India's oil imports do emanate from Iran and in fact that in the current energy market it is not easy to consider that India can sort of manage without Iranian oil. Iranian oil is very important to India. So, I think that continues to be a very important issue for us. That is why we had sought the mechanisms for payments so that we continue our trade with Iran,", India Times quoted Mathai as saying.

Asked if India was looking at paying Iran for crude oil through Russia, Mathai said, “We are looking at all appropriate mechanisms for conducting our trade with Iran.”

Reports said some Turkish banks refuse to be intermediary for Indian oil payments to Iran, so New Delhi is expected to start talks with Moscow about routing payments through Russian banks.

A second official, who wanted to remain unnamed, told the Livemint that the proposal was on the table and may come up during talks between Singh and Russian President Dmitry Medvedev on Friday.

Energy-deficient India imports around 400,000 barrels of crude oil a day from Iran and has been trying to resolve an impasse over the method of settlement, after India decided last year to discontinue paying through the 35-year-old Asian Clearing Union (ACU) system.

Established in 1975, the system was used by India, Iran, Bangladesh, Bhutan, Nepal, Pakistan, the Maldives, Myanmar and Sri Lanka to reduce foreign exchange spending on account of transaction costs. 

India is currently paying for the oil it buys from Tehran through Turkey.