U.S. Targets Chinese 'Teapot' Refinery with Sanctions Over Iranian Oil Purchases

The U.S. Treasury Department has sanctioned Hengli Petrochemical's Dalian refinery, a major Chinese buyer of Iranian oil, as part of efforts to tighten economic pressure on Iran. This move comes just as the U.S. and Iran prepare for another round of peace negotiations.

These sanctions also extend to about 40 shipping companies and vessels linked to Iran's shadow fleet, signaling Washington's intent to disrupt Iran's oil exports. China has condemned the sanctions, calling them illegal and urging the U.S. to cease targeting Chinese firms.

Sanctions Hit Key Chinese Refinery and Iran's Shadow Fleet

The U.S. Treasury's Office of Foreign Assets Control designated Hengli Petrochemical (Dalian) Refinery, labeling it one of Iran's largest customers for crude oil and petroleum products. Alongside, sanctions were imposed on approximately 40 shipping companies and vessels operating as part of Iran's covert oil transport network.

This action follows previous sanctions on other Chinese independent refiners, which have faced challenges such as difficulties in crude oil procurement and the need to sell products under alternate names.

China Pushes Back Against 'Illegal' Sanctions

China's embassy in Washington criticized the U.S. for what it calls the politicization and weaponization of trade and technology issues. The embassy urged the U.S. to stop abusing sanctions against Chinese companies, emphasizing that normal trade should not be disrupted.

"We call on 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 sanction to hit Chinese companies."—Chinese Embassy Spokesperson

China Remains Largest Buyer of Iranian Oil Despite Sanctions

According to 2025 data from analytics firm Kpler, China purchases over 80% of Iran's shipped oil. While U.S. sanctions deter some larger independent refiners, experts note that many independent Chinese refineries have limited exposure to the U.S. financial system, reducing the sanctions' impact.

Treasury Secretary Scott Bessent highlighted ongoing efforts to impose a 'financial stranglehold' on Iran by targeting vessels, intermediaries, and buyers involved in moving Iranian oil globally.

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

Future Outlook: Escalating Pressure Amid Diplomatic Talks

The U.S. has also warned Chinese banks that facilitating Iranian oil purchases could lead to secondary sanctions. With the recent expiration of a temporary waiver on Iranian oil sanctions at sea, the pressure on independent refiners to pay premiums for Iranian oil has increased.

As Washington and Tehran engage in renewed peace talks, these sanctions underscore the U.S. strategy to leverage economic tools to influence Iran's behavior, while navigating complex trade relations with China.