U.S. Treasury Escalates Sanctions Pressure on Chinese Refineries Over Iranian Crude

The U.S. Treasury Department issued a stern warning to financial institutions on Tuesday, stating that any engagement with independent Chinese refineries—commonly known as 'teapots'—that process Iranian oil could lead to severe sanctions. The Treasury urged banks to implement enhanced due diligence, particularly for transactions involving refineries in China's Shandong province. China currently imports approximately 90% of Iran's oil exports, with teapot refineries handling the bulk of these shipments. Washington asserts that these revenues directly fund the Iranian regime's military and weapons programs. Treasury Secretary Scott Bessent emphasized that the U.S. will continue to exert maximum pressure on any entity facilitating illicit flows to Tehran. Market dynamics are tightening as Iran's primary export terminal on Kharg Island reportedly nears maximum storage capacity. According to Bessent, this bottleneck could force Tehran to curtail production, potentially resulting in a loss of approximately $170 million in daily revenue. Enforcement has already intensified, with the U.S. sanctioning several entities, including Hengli Petrochemical (Dalian) Refinery, one of Iran's largest customers. The Treasury's dragnet now extends to port terminal operators in Shandong and logistics providers linked to 'shadow fleets'—sanctioned tankers that use ship-to-ship transfers and forged documentation, often labeled as 'Malaysian blend,' to obscure the oil's origin. This escalation occurs amid an indefinite ceasefire between the U.S. and Iran and just weeks before President Trump's scheduled visit to Beijing. While Chinese Foreign Minister Wang Yi has expressed opposition to unilateral sanctions, the U.S. continues to maintain its blockade of Iranian ports.