The U.S. Treasury Department has warned that independent Chinese refineries, particularly in Shandong province, are at risk of sanctions because of their role in importing Iranian crude oil.
According to the Finance Ministry, China buys about 90 per cent of Iran’s oil exports, much of which is refined at these small refineries, generating revenue for Tehran.
“These revenues ultimately benefit the Iranian regime, its weapons programmes and its armed forces,” the Treasury Department said in a statement.
The United States has increased economic pressure on Iran by targeting the country’s international shadow banking infrastructure, shadow shipping fleet and Chinese refineries (“teapot”) that support Iran’s oil trade as part of the administration’s “maximum pressure” campaign, Treasury Secretary Scott Bessent said in an X social media post.
Bessent said Iran’s main oil export centre, Kharg Island, has nearly exhausted its storage capacity, which could force Tehran to cut oil production. He added that this could cost the country about $170 million a day in lost revenue and potentially cause “irreparable damage to Iran’s oil infrastructure.”
“The Treasury Department will continue to apply maximum pressure, and any person, vessel, or entity that facilitates illicit flows to Tehran risks being subject to US sanctions,” Bessent wrote on X.
“Teapot refineries are small refineries that are located mostly in China’s Shandong province. They refine imported crude oil, often buying sanctioned oil from Iran and Russia at a discount.
On 24 April, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against China’s private refiner, Hengli Petrochemical (Dalian) Refinery Co., Ltd.
In a statement, OFAC said that Hengli is one of Iran’s largest customers for crude oil and other petroleum products and has made purchases worth billions of dollars.
As Bloomberg pointed out, China’s large state-owned enterprises generally avoid blacklisted oil for fear of being hit by U.S. sanctions. But private refineries, including those often referred to as “teapot” refineries, have been Tehran’s most important customers, making the most of the reduced prices.