* Fourth straight month of cuts in Iranian imports
* Essar replaces MRPL as top buyer of Iranian oil in July
* India's Jan-July oil imports up 9.2 pct y/y
By Nidhi Verma
NEW DELHI, Aug 21 (Reuters) - India's oil imports from Iran fell by more than 40 percent in July from June and a year ago, as imports by Tehran's biggest local client MRPL were hit by a shortage of ships and insurance cover caused by European Union sanctions.
The U.S. and EU sanctions that took full effect on July 1 target Iran's nuclear programme which the West thinks is aimed at making weapons, but the Islamic Republic denies that.
Refiners in India, Iran's biggest oil client after China, have struggled to find insurance and shipping for imports since the European Union brought in sanctions on July 1 banning most major insurance firms from covering Iranian oil shipments.
India shipped in 201,860 barrels per day (bpd) from Iran in July compared with 346,600 bpd in June and about 338,900 bpd in July 2011, trade data made available to Reuters showed on Tuesday.
Iran has already slipped to third place among India's oil suppliers in 2011/12, replaced by Iraq and ceding a position it had held for five years, as western financial pressure took its toll on imports from the sanctions-hit nation.
India, the world's fourth-largest oil importer, in June secured a waiver from U.S. sanctions for six months by reducing imports, and continued cuts in import from Tehran could raise New Delhi's chances for renewed exemptions later this year.
India is selectively allowing state-run refiners to buy oil using Iranian ships and insurance cover as India prefers to protect business for its domestic shippers and insurers. Private refiners need not take permission for using Iranian ships.
Falling imports pushed Iran to sixth position in the list of India's biggest suppliers of oil in July, compared with the third position it enjoyed in June and No. 4 a year ago.
The shortfall is being made up with extra barrels from the world's biggest exporter, Saudi Arabia, as well as the United Arab Emirates, which emerged as the fourth-biggest supplier to India.
While state-run refiners have stepped up imports from Nigeria, which was third-biggest supplier in July, private refiner Essar Oil has turned its focus to Latin America.
Essar, which raised the use of heavy and ultra-heavy crude oil in April-June, has signed a deal to buy 12 million barrels of oil from Colombia.
Annual imports from Iran in January-July fell 2.3 percent, reversing the upward trend of January-June, the data showed.
India's overall oil imports in January-July rose about 9.2 percent from a year ago as the country expanded its refining capacity. Total oil imports in July declined 4.12 percent from June and 4.6 percent from July last year, the data showed.
In July Essar emerged as Iran's top Indian client replacing Mangalore Refinery and Petrochemicals, which lifted only a fifth of planned Iran imports in July. MRPL is looking at alternatives to make up for the Iran shortfall.
State-run Hindustan Petroleum had lifted only one of its two July cargoes due to maintenance work at its Vizag refinery in southern India, reducing its monthly purchase by 64 percent to 25,300 bpd.
Essar's imports rose by a third in July to 154,400 bpd compared with June, the data showed, while MRPL's declined 86 percent to 22,200 bpd.
Essar has renewed its annual deal of 100,000 bpd with Iran for this fiscal year starting April 1 but plans to lift 15 percent less volumes, while MRPL has reduced the size of its deal to 100,000 bpd compared with 124,000 bpd of 2011/12.
HPCL aims to buy 60,000 bpd oil from Iran -- 40,000 firm and 20,000 optional, compared with 70,000 bpd in 2011/12, and Indian Oil Corp, the country's biggest refiner, plans to lift 30,000 bpd compared with 42,000 bpd a year ago.
IOC and Bharat Petroleum Corp. Ltd. did not buy any Iranian oil in July. (Editing by Jo Winterbottom and James Jukwey)