US Sanctions Chinese Teapot Refinery for Buying Iranian Oil Amid Peace Talks

The Trump administration said on Friday it had imposed sanctions on an independent "teapot" refinery in China for buying billions of dollars' worth of Iranian oil, as Washington and Tehran head into another round of peace talks over the weekend. The Treasury Department targeted Hengli Petrochemical (Dalian) Refinery, which it said is one of Iran's largest customers of crude oil and petroleum products. The department's Office of Foreign Assets Control said it also imposed sanctions on about 40 shipping companies and vessels that operate as part of Iran's shadow fleet. China has said it opposes "illegal" unilateral sanctions. On Friday, its embassy in Washington said normal trade should not be harmed and called on Washington to stop "abusing" sanctions to target Chinese companies. "We call on the US 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," a spokesperson for the Chinese embassy said in a statement. The Trump administration last year imposed sanctions on teapots Hebei Xinhai Chemical Group, Shandong Shouguang Luqing Petrochemical and Shandong Shengxing Chemical. That created some hurdles for the refiners, including difficulties receiving crude and having to sell refined products under different names. Teapots account for a quarter of Chinese refinery capacity, operate with narrow and sometimes negative margins and have been squeezed recently by tepid domestic demand. China buys most shipped Iranian oil. The US sanctions, which block US assets of those designated and prevent Americans from doing business with them, have deterred some larger independent refiners from buying Iranian oil. China buys more than 80 percent of Iran's shipped oil, 2025 data from analytics firm Kpler showed. Sanctions experts have long said, however, that the independent refineries are somewhat immune to the full effect of US sanctions as they have little exposure to the US financial system. Imposing sanctions on Chinese banks that help facilitate the purchases would have a larger effect on purchases of Iranian oil, they say. Treasury Secretary Scott Bessent said the US is imposing a "financial stranglehold" on the Iranian government. "Treasury will continue to constrict the network of vessels, intermediaries, and buyers Iran relies on to move its oil to global markets," Bessent said. Bessent told reporters at the White House on April 15 that Treasury has written to two Chinese banks and "told them that if we can prove that there is Iranian money flowing through your accounts, then we are willing to put on secondary sanctions." The teapot refiners recently have had to buy Iranian oil at premiums to international Brent oil prices after Washington's temporary waiver of sanctions on Iranian oil at sea raised expectations that India might buy more of the oil. The US last week allowed the waiver to expire.