Washington targets China’s “teapot” refiners in Iran crackdown

The administration of US President Donald Trump announced on Friday that it has imposed sanctions on an independent Chinese “teapot” refinery for purchasing billions of dollars’ worth of Iranian oil, as Washington and Tehran prepare for another round of peace talks over the weekend.

The US Department of the Treasury said it has designated Hengli Petrochemical (Dalian) Refinery, describing it as one of the largest buyers of Iranian crude oil and petroleum products. The Treasury’s Office of Foreign Assets Control also imposed sanctions on approximately 40 shipping companies and vessels operating as part of Iran’s so-called shadow fleet used to transport oil, as per Reuters.

China responded by reiterating its opposition to what it described as “illegal” unilateral sanctions. In a statement issued in Washington, a spokesperson for the Chinese embassy said normal trade activities should not be disrupted and urged the United States to halt what it called the misuse of sanctions against Chinese firms.

"We call on the US to stop politicising trade and sci-tech issues and using them as a weapon and a tool and stop abusing various kinds of sanctions to hit Chinese companies," the spokesperson said.

The latest measures follow earlier US sanctions imposed last year on several independent Chinese refineries, including Hebei Xinhai Chemical Group, Shandong Shouguang Luqing Petrochemical, and Shandong Shengxing Chemical.

Those earlier sanctions created operational challenges for the affected refiners, including difficulties in securing crude oil supplies and the need to sell refined products under alternative names. Independent “teapot” refineries account for roughly a quarter of China’s refining capacity and typically operate on narrow, and at times negative, margins. They have also been under pressure due to weak domestic demand.

Under US sanctions rules, designated entities have their US-based assets blocked and are barred from conducting business with American individuals or companies. These measures have discouraged some larger independent refiners from purchasing Iranian oil.

According to 2025 data from analytics firm Kpler, China purchases more than 80 per cent of Iran’s exported oil.

Sanctions experts note, however, that smaller independent refiners are relatively insulated from the full impact of US measures because of their limited exposure to the US financial system. They argue that imposing sanctions on Chinese banks involved in facilitating such transactions would have a more significant effect on curbing Iranian oil sales.

US Treasury Secretary Scott Bessent said the measures are part of a broader effort to tighten financial pressure on Tehran.

"Treasury will continue to constrict the network of vessels, intermediaries, and buyers Iran relies on to move its oil to global markets," Bessent said.

He added earlier, speaking at the White House on April 15, that the Treasury had formally warned two Chinese banks about the risk of secondary sanctions.

Bessent said the department had written to the banks and "told them that if we can prove that there is Iranian money flowing through your accounts, then we are willing to put on secondary sanctions."

Recent market dynamics have also affected the trade. Independent refiners in China have been purchasing Iranian crude at premiums to international Brent prices after a temporary US waiver allowing Iranian oil shipments at sea raised expectations that India might increase imports. The United States allowed that waiver to expire last week, further tightening supply conditions.

By Tamilla Hasanova