U.S. warns banks of sanctions risk over China ‘teapot’ refineries handling Iranian oil

The U.S. Treasury warned financial institutions on Tuesday that they could face sanctions if they do business with Chinese refineries that process Iranian oil.

Treasury called on financial institutions in a statement Avoid facilitating transactions involving independent refineries, known as “teapots,” that import Iranian oil; because such transactions may subject them to sanctions.

The Treasury noted that China purchases approximately 90% of Iran’s oil exports, and kettle refineries account for the majority of these imports.

“This revenue ultimately benefits the Iranian regime, its weapons programs, and its military. Some Chinese teapot refiners have used the U.S. financial system to conduct dollar-denominated transactions and supply U.S. goods,” the Treasury said. he added.

It also called on the institutions to conduct “enhanced due diligence” in transactions involving China-based refineries, especially those in Shandong province, and other Asian and Middle East-based entities in Iran’s oil supply chain to China.

US Treasury Secretary Scott Bessent said in x He said the Treasury “will continue to apply maximum pressure and any person, vessel or entity facilitating illicit flows into Tehran will risk exposure to US sanctions.”

Bessent said Iran’s main export terminal on Kharg Island “will soon approach storage capacity,” which could force Tehran to cut production and lose about $170 million in daily revenue.

The move comes as Washington aims to cut off revenue flows to Iran as part of a “maximum pressure” campaign imposed by US President Donald Trump. in februaryWeeks before the start of the war with Iran.

Last week, the United States imposed sanctions on the Hengli Petrochemical (Dalian) Refinery, one of China’s largest kettle refineries, describing it as one of Iran’s largest customers of crude oil and petroleum products.

Four other kettle refineries were also sanctioned. The Treasury also expanded its network to include port terminal operators in Shandong Province and logistics service providers linked to Iranian oil shipments.

Iranian crude is generally transported to Chinese kettle refineries using a “shadow fleet” of tankers, sanctioned vessels that manipulate location data to avoid detection.

Many shipments involve multiple ship-to-ship transfers using scrap ships that are no longer in operation, sometimes in the Persian Gulf or the Strait of Malacca, to disguise their origin.

The Treasury Department stated that in some cases Iranian oil was blended with materials from other countries or relabeled with false documentation to further conceal its origin, most commonly known as “Malaysian blend”.

The warning comes less than a month before Trump’s planned visit to Beijing, where trade and investment are expected to be discussed.

Last week, during a meeting Chinese Foreign Minister Wang Yi said in a meeting with Iranian Foreign Minister Abbas Araqchi that Beijing opposes “abuse of power and illegal unilateral sanctions”.

Washington and Tehran are currently observing the indefinite ceasefire declared by Trump, but tensions remain high. While Iran has not yet reopened the Strait of Hormuz, the USA continues its blockade of Iranian ports.

— CNBC’s Anniek Bao and Evelyn Cheng contributed to this report