U.S. Levies Sanctions Against Chinese ‘Teapot’ Oil Refineries for Iranian Oil Purchases

Latest Developments

• Treasury Sanctions Chinese Refineries: The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned a Chinese “teapot” refinery and its CEO on March 20 for purchasing and refining “hundreds of millions of dollars” of Iranian crude oil. Shandong Shouguang Luqing Petrochemical Co. (Luqing Petrochemical) and its CEO, Wang Xueqing, were designated for “operating in the petroleum sector of the Iranian economy.” OFAC’s sanctions are aimed at “cutting off the revenue streams that enable Tehran’s continued financing of terrorism and development of its nuclear program,” according to Treasury Secretary Scott Bessent.
• ‘Teapot’ Refineries Provide Lifeline for Iran: “Teapot” refineries — privately owned Chinese oil companies — are the largest purchasers of Iranian oil, providing the Islamic Republic its “primary economic lifeline,” Bessent stated. Treasury’s announcement revealed that Luqing Petrochemical had purchased $500 million of Iranian oil.
• Additional ‘Shadow Fleet’ Sanctions: The United States additionally sanctioned eight vessels that transport Iranian crude oil to “teapot” refineries in China, along with their owners and managing companies. In total, 19 entities and vessels were “responsible for shipping millions of barrels of Iranian oil” to sanctioned Chinese refineries. This latest round of sanctions marks the fourth time the Trump administration has targeted Iranian oil sales since reimposing maximum pressure sanctions on Iran.

FDD Expert Response

“This is the most significant Iran-related designation during the second term of the Trump administration and is the most in line with National Security Presidential Memorandum-2 thus far. Moving forward, the administration should consider penalties against ports and even financial institutions in China that foster Beijing’s compliance with Maximum Pressure.” — Behnam Ben Taleblu, Iran Program Senior Director and Senior Fellow

“Treasury’s recent action is most welcome and signals the Trump White House’s readiness to fully deploy the power of our sanctions toolkit against key enablers of the Iranian regime’s illicit oil supply chain. Treasury should likewise pursue meaningful secondary sanctions targeting the financial institutions supporting teapot refiner operations. Sustained, aggressive targeting of these actors is the only way to truly disrupt Iran’s flow of oil to its top customer — the Chinese Communist Party.” — Max Meizlish, Senior Research Analyst

“Targeting the Chinese refineries as the users of Iranian oil sends a strong signal to Beijing to reevaluate the cost-benefit analysis of bypassing U.S. sanctions. China is the main — if not the only — customer of Iranian oil. Treasury can further increase pressure on China by targeting the Chinese ports and banks that facilitate this trade.” — Saeed Ghasseminejad, Senior Iran and Financial Economics Advisor

FDD Background and Analysis

“U.S. Sanctions Should Target Tehran’s Top Economic Operatives,” by Saeed Ghasseminejad

“U.S. Should Impose Sanctions on Iran’s Nascent Lithium Industry,” by Saeed Ghasseminejad

“Iran’s Nuclear Disarmament,” by Orde Kittrie, Andrea Stricker, and Behnam Ben Taleblu

“Trump Ends Sanctions Waiver on Iraq’s Purchase of Iranian Electricity,” FDD Flash Brief