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LONDON, April 5 (Reuters) - Iran's oil minister dismissed India's decision to cut oil imports from Tehran in 2017/18 by a fifth as a threat on Wednesday, in an escalation of a dispute over a giant gas field contract.
Sources familiar with the matter told Reuters last week that Indian state refiners were going to cut oil imports from Iran, as New Delhi seeks to put pressure on Tehran to award the Farzad B gas field to an Indian consortium.
"India is one of our good costumers, but we cannot sign (a) contract under threat," Bijan Zanganeh was quoted as saying by Iran's ISNA news agency.
"India's cut of oil imports from Iran will not cause any trouble to us as we have other buyers," he added.
Zanganeh said despite an extension of deadlines, India has not offered an acceptable proposal for the development of the gas field.
"Their proposal was not profitable to Iran ... We sent (the) Indians a letter and told them we are keen to continue negotiations, but under sensible conditions, not under threats."
India, Iran's biggest oil buyer after China, was among a handful of countries that continued to deal with the Tehran despite Western sanctions over its nuclear programme.
A consortium headed by ONGC Videsh Ltd (OVL), the overseas investment arm of Indian explorer Oil and Natural Gas Corp, discovered Farzad B in the Farsi offshore block in 2008.
The consortium, which also includes Oil India and Indian Oil Corp, could not obtain permission to develop the field due to Western sanctions, but those sanctions were removed last year.
India and Iran had both been hopeful of wrapping up the Farzad B deal by March, although Zanganeh said Iran has asked other countries to submit their proposals for its development. (Reporting by Bozorgmehr Sharafedin; editing by Alexander Smith)