Iran is being paid for oil sales to India through a Turkish bank, the managing director of the National Iranian Oil Company said Friday on Mehr news agency.

"There is no problem with exports to India and money continues to be transferred through a Turkish bank," said Mohsen Ghamsari.

That bank, however, has warned Iranian authorities that it will not take on new clients making money transfers to pay for Iran's oil exports, Ghamsari was quoted as saying.

India, which buys about 400,000 barrels per day from Iran, had expressed concern that this channel could no longer be used to make payments.

Ghamsari said that "part of the money owed to Iran by India was transferred through Turkey" after noting that the Iranian central bank also had "other channels" to receive its oil revenues.

India announced on Tuesday it would continue buying Iranian oil despite mounting US and EU pressure on the Islamic republic's clients to limit their purchases as long as Iran pursues its controversial nuclear programme.

Iran is India's second-largest oil supplier after Saudi Arabia, providing around 12 percent of the fast-growing country's needs at an annual cost of around $12 billion.

China, another major client, has also rejected Western sanctions on Iran, while Japan and South Korea have expressed reservations over the consequences such sanctions could have on their economies.

Turkey, which opposes unilateral sanctions against Iran, is also a major client, purchasing gas in addition to oil. Iranian exports to Turkey, mostly from its energy sector, were worth over 12 billion dollars in 2011, according to Iran's media.

This week, during a visit by Iranian Foreign Minister Ali Akbar Salehi to Turkey, the two countries said they plan to boost annual trade to 30 billion dollars by 2015.

The West fears Iran is trying to build a nuclear bomb. Tehran insists its nuclear programme is purely for civilian use and refuses to abandon its uranium enrichment activities despite four sets of UN sanctions.

Closing Gulf oil route remains option for Iran: envoy
United Nations (AFP) Jan 19, 2012 - Iran would not try to block the Strait of Hormuz unless a foreign power seeks to "tighten the noose" in a growing nuclear showdown with the West, Tehran's UN envoy said Thursday.

"All the options are or would be on the table," if Iran is threatened, ambassador Mohammad Khazaee said on US television, referring to the strategic shipping route, which is a chokepoint for one fifth of the world's traded oil.

"There is no decision to block and close the Strait of Hormuz unless Iran is threatened seriously and somebody wants to tighten the noose," Khazaee said on the Charlie Rose show.

"We believe that the Strait of Hormuz should be the strait of peace and stability," the envoy added. "But if foreign powers want to create trouble in the Persian Gulf, of course it would be the right of Iran as well as the rest of the countries in the region to try to defend themselves."

Amid growing speculation of a military strike against Iran's nuclear facilities, Khazaee said the growing tensions should be end through "peace, dialogue and stability."

Iran has accused Israel of involvement in the killings of its nuclear scientists. But the ambassador said he did not think Israel would try to bomb Irans nuclear facilities. "There are enough wise politicians around the world to advise them in case if they want to do that not to do it," he said.

The United States, France, Britain and Germany accuse Iran of seeking to build a nuclear bomb. Iran says its atomic drive is peaceful.

The United Nations said meanwhile that there an "urgent need" to defuse tensions between Iran and the West through dialogue.

The solution "also includes the need on the part of the Iranian authorities to prove to the satisfaction of the international community that their nuclear program is for peaceful purposes," said UN spokesman Martin Nesirky.

He added that because of the Strait of Hormuz's key role for oil supplies, UN leader Ban Ki-moon believes "it is important that free passage be guaranteed in accordance with the law of the sea."

Ban has discussed the Iran tensions with leaders from China and Gulf states during talks in recent days.