The United States has imposed sanctions on a Chinese oil refinery for purchasing hundreds of millions of dollars worth of Iranian oil.
Ahead of potential new talks aimed at ending the US-Israeli war on Iran, the US Treasury Department announced on Friday that it was targeting Hengli Petrochemical (Dalian) Refinery, China’s second-largest “teapot” or independent refinery.
The Treasury stated that Hengli is “one of Tehran’s most valued customers” and has generated hundreds of millions of dollars in revenue for the Iranian military through its crude oil purchases.
Additionally, new sanctions were imposed on approximately 40 shipping firms and vessels alleged to be operating as part of Iran’s shadow fleet.
The Chinese embassy in Washington, D.C., strongly criticized the move. A spokesperson urged the U.S. to “stop politicizing trade and sci-tech issues and using them as a weapon and a tool, and stop abusing various kinds of sanctions to target Chinese companies.”
According to analytics firm Kpler, China sources more than half of its oil from the Middle East and last year acquired over 80 percent of Iran’s shipped oil.
The US Navy has maintained a blockade of Iranian ports since April 13, a measure President Donald Trump claims is intended to further restrict Iran’s proceeds from oil and gas exports.
Teapots Under Pressure
China’s “teapot” refineries are small, privately owned facilities, primarily located in Shandong province, and are named for their distinctive teapot-like shape. They play a crucial role in bolstering China’s oil supplies by importing and stockpiling discounted Iranian and Russian oil, while simultaneously allowing state-owned enterprises to remain more insulated from politically risky oil trading.
US Treasury Secretary Scott Bessent pledged on Friday to continue targeting the “network of vessels, intermediaries, and buyers Iran relies on to move its oil to global markets.” He warned that “Any person or vessel facilitating these flows – through covert trade and finance – risks exposure to US sanctions.”
Beyond the threat of sanctions, the US-Israel war on Iran has intensified financial pressures for teapot refineries. Brussels-based economic think tank Bruegel reported last month that these refineries are facing “high replacement prices in a market already strained by global tensions.”
Even before the current conflict, the Trump administration had been targeting China’s independent refineries. Last year, the Treasury sanctioned Hebei Xinhai Chemical Group, Shandong Shouguang Luqing Petrochemical, and Shandong Shengxing Chemical.
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