US imposes sanctions on Chinese teapot refinery for buying Iranian oil

The Trump administration said on Friday it imposed sanctions on an independent “teapot” refinery in China for buying billions of dollars’ worth of Iranian oil as Washington and Tehran struggle to restart peace talks.

The Treasury Department targeted Hengli Petrochemical (Dalian) Refinery Co, 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. 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 receiving crude and forcing them to sell refined products under different names. Teapots account for roughly a quarter of Chinese refinery capacity, operate with narrow and sometimes negative margins and have been squeezed recently by tepid domestic demand.

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% of Iran’s shipped oil, data for 2025 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 China’s banks that help facilitate the purchases would have a larger effect on the 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.

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.