On July 16, 2018, Henli Petrochemical’s refining and petrochemical complex located on Changxing Island in Dalian, Liaoning Province, China.
Chen Aizhu | Reuters
As the U.S. and Iranian governments face another round of peace talks over the weekend, the Trump administration announced Friday that it has imposed sanctions on China’s independent “teapot” refineries that have bought billions of dollars worth of Iranian crude oil.
The Ministry of Finance targeted the Hengli Petrochemical (Dalian) refinery, saying it is one of Iran’s largest customers for crude oil and petroleum products. The ministry’s Office of Foreign Assets Control also announced sanctions on about 40 shipping companies and vessels operating as part of Iran’s shadow fleet.
China said it opposes “illegal” unilateral sanctions.
On Friday, the embassy in Washington said normal trade should not be undermined and called on the US government to end its “abuse” of sanctions targeting Chinese companies.
“We call on the United States to stop politicizing trade and science and technology issues and using them as weapons and tools, and stop abusing various sanctions to attack Chinese companies,” a Chinese embassy spokesperson said in a statement.
Last year, the Trump administration imposed sanctions on Hebei Xinhai Chemical Group, Shandong Shouguangluqing Petrochemical, and Shandong Shengxing Chemical.
This created several hurdles for refiners, including difficulty receiving crude oil and having to sell the refined product under a different name. Teapots account for a quarter of China’s refinery capacity, operate on narrow and sometimes negative profit margins, and have been squeezed in recent days by weak domestic demand.
China buys most of Iranian crude oil shipped
U.S. sanctions, which block U.S. assets in designated countries and prevent Americans from doing business with them, have deterred some large independent refiners from buying Iranian crude. China buys more than 80% of the crude oil shipped to Iran, according to 2025 data from analytics firm Kpler.
But sanctions experts have long said that independent refineries are somewhat immune to the full impact of U.S. sanctions because they have little exposure to the U.S. financial system. Imposing sanctions on Chinese banks that facilitate the purchases would have a greater impact on Iranian oil purchases, they say.
Treasury Secretary Scott Bessent said the United States was imposing a “financial stranglehold” on the Iranian government. “The Treasury Department will continue to restrict the network of vessels, intermediaries, and buyers that Iran relies on to transport its crude oil to global markets,” Bessent said.
Bessent told reporters at the White House on April 15 that the Treasury Department sent a letter to two Chinese banks saying, “We are prepared to impose secondary sanctions if we can prove that Iranian money is flowing into your accounts.”
Teapot refiners recently had to pay a premium over the international price of Brent crude to buy Iranian crude, as the temporary lifting of U.S. government maritime sanctions on Iranian crude increased expectations that India would buy more crude. The United States last week allowed the exemption to expire.
