New Delhi, Sep 28 (IANS): India on Wednesday will pay Iran $700 million towards part settlement of its oil dues, which will be the first payment following Iran's landmark nuclear deal with world powers in July paved the way for easing sanctions against the country.

A senior source told IANS here on Monday that Indian refiners will be making $700 million payment in rupees equivalent to to the Kolkata branch of state-run UCO Bank on Wednesday for transmitting to the Reserve Bank of India, which will make arrangements for its onward remittance to Iran.

Last month, the US Treasury approved the payment of $1.4 billion out of India's $6.5 billion outstanding oil payments to Iran.

While Mangalore Refinery and Petrochemicals will pay $300 million in dues and Essar Oil will clear $300 million, Hindustan Petroleum Corp and HPCL-Mittal Energy will be the other refiners which will clear part of their outstanding on Wednesday, the source added.

Iran has asked India to pay, within the next two months, the dues on account of oil supplies that have accumulated since 2013 with sanctions on the country blocking payment routes.

Iranian Foreign Minister Javad Zarif said here last month that Iran's central bank and government officials are working with their Indian counterparts on the technicalities of the settlement of India's oil import dues.

Since February 2013, Indian state-run and private refiners have paid around 45 percent of the payment due in rupees, through the Kolkata branch of the state-run UCO Bank.

The balance has been accumulating, pending finalisation of a payment route and mechanism.

Iran was until 2006 India's second-largest supplier of crude oil, but dropped to number seven by the end of 2013-14.