* Iran drops to seventh on list of India's oil suppliers
* India replaces Iran shipments with oil from Venezuela, Iraq, Oman
* India Oil may delay further Iran imports to 4th quarter -sources
* Essar Oil could be left as Iran's sole Indian client -sources
By Nidhi Verma
NEW DELHI, June 17 (Reuters) - India cut its Iranian oil imports by more than 40 percent in the first five months of the year, replacing the crude with shipments from Venezuela, Iraq and Oman, and pushing Iran down four places to seventh among its suppliers.
India's imports of Iranian oil for May dropped 12.2 percent from a year ago to 213,500 barrels per day (bpd), tanker arrival data compiled by Reuters from trade sources shows.
The cuts underline the effectiveness of U.S. and European sanctions aimed at Tehran over its suspected pursuit of nuclear weapons. Those measures reduced Iran's oil exports to the lowest in decades in May and have cost it billions of dollars in lost revenue per month since early 2012.
Washington is now seeking to cut Iran's oil shipments further through tighter sanctions.
The Middle Eastern country's economy has been battered as a result of the sanctions aimed at ending its nuclear activities, though there are hopes of better relations with the West after the election of moderate cleric Hassan Rohani to its presidency.
But with Iran's supreme leader, Ayatollah Ali Khamenei, still deciding state policy, there is not expected to be a rebound in oil exports anytime soon.
While India's Iranian imports for May were up more than 80 percent from April, the year-to-date total was down 41.8 percent, the tanker data showed.
Iran's share of India's total oil imports dropped to 5.5 percent over the January to May period, down from more than 10 percent in the same period last year, the data also showed.
Earlier this month, Washington granted its third 180-day waiver to Asian countries including India for significantly reducing Iranian oil imports in the six months to May.
Hindustan Petroleum Corp and Mangalore Refinery and Petrochemicals halted their Iranian oil purchases in April as it became difficult to insure refineries processing oil from the OPEC member, making the largest contribution to India's cuts this year.
Indian insurers worried about running afoul of sanctions have said they will not be able to pay claims at plants processing Iranian crude.
That has left the country's biggest refiner, state-owned Indian Oil Corp - whose insurance coverage is due for renewal only in November - and private refiner Essar Oil as Iran's only Indian clients, according to sources.
The data showed IOC bought two very large crude carriers of Iranian oil in May, and industry and government sources said the state refiner is not planning to lift any more Iranian crude until the fourth quarter of 2013.
This means Essar Oil would be Iran's sole customer in India from June to later this year, unless other Indian refiners find a way to insure plants processing Iranian crude or sanctions are eased.
Other Asian countries have also been showing steady cuts in their Iranian crude imports. Customs data on Saturday showed that South Korea had cut its May oil imports from Iran by 8.3 percent from a year ago.
India imported nearly 80 percent more oil from Latin America in the January to May period as it cut its dependence on Iran. The region accounted for about a fifth of India's overall imports, up from 12 percent in the same period a year ago.
Overall, Asia's third-largest economy shipped in 12.6 percent more oil in May than a year ago, while imports for the January-May period rose about 8.8 percent, the data showed. (Editing by Manash Goswami and Tom Hogue)