Trump Strikes at China’s Iranian Oil Trade, but It’s Not Enough

The bombs may have stopped falling on Iran — for now — but that doesn’t mean the regime isn’t still under attack, including its illicit oil trade with China. The U.S. Treasury Department on Friday sanctioned Hengli Petrochemical (Dalian) Refinery Co., Ltd., China’s second-largest independent “teapot” refinery, for purchasing billions of dollars’ worth of Iranian petroleum. Treasury also targeted about 40 shipping firms and vessels tied to Iran’s “shadow fleet” that move sanctioned cargo globally.

While significant, the designations are, in many ways, nothing new. President Donald Trump had already sanctioned four Chinese teapot refineries previously as part of his renewed “Maximum Pressure” policy against the Islamic Republic. To build leverage and compel Tehran to compromise, President Trump will need his Treasury Department to step up enforcement against the regime’s most important enablers: foreign financial institutions.

A Bigger Test Than Prior Action Against Teapots

Treasury describes Hengli Petrochemical as one of Iran’s largest customers and says it has received Iranian oil shipments since at least 2023, including cargoes overseen by Sepehr Energy Jahan Nama Pars Company, the oil sales arm of Iran’s Armed Forces General Staff (AFGS). The AFGS is a sanctioned military body that coordinates the activities of the national military (Artesh) and the Islamic Revolutionary Guard Corps (IRGC).

Unlike other teapots sanctioned by the United States, Hengli Petrochemical is larger and potentially more integrated into China’s broader banking, trade, and logistics ecosystem. This may explain why Treasury quietly issued a one-month authorization, referred to as General License (GL) V, at the same time it levied the designation on Friday, so that firms can conclude or terminate any dealings with Hengli Petrochemical. This means any action Treasury takes against firms that continue to deal with Hengli Petrochemical after GL V expires will occur following the Trump-Xi summit in Beijing next month.

Tehran Diversifies Sanctions Circumvention

Absent from Treasury’s press release on Friday was any mention of it identifying and subsequently freezing $344 million in cryptocurrency belonging to the already-sanctioned Central Bank of Iran (CBI). The freezing action occurred in coordination with Tether, the world’s largest issuer of dollar-backed stablecoins.

The Islamic Republic is increasingly turning to cryptocurrency to evade sanctions, reportedly trading $7.8 billion in crypto last year. Treasury designated Zedcex and Zedxion in January 2026, targeting two UK-registered exchanges that managed cryptocurrency linked to Iran’s IRGC. The UK appears to now be forcibly dissolving both. Still, the Trump administration has not sanctioned Nobitex, Iran’s largest cryptocurrency exchange, which is reportedly linked to IRGC, Houthis, and Hamas terror financing. Meanwhile, since the U.S. blockade of Iranian ports in April, Tehran has sought payment in crypto to allow ships carrying oil to pass through the Strait of Hormuz.

Economic Fury Requires Escalating Pressure

Operation Economic Fury should not rely on the logic of incremental escalation when Washington is concurrently taking more forceful steps like blockading Iranian ports or engaging in overt military action. Targeting Tehran’s tankers and vessels were moves the Biden administration was willing to undertake late in 2024. Building on these designations, the Trump administration should direct the Treasury Department to pressure the financial institutions abroad supporting the Islamic Republic, in addition to designating the now-standard troika of ships, ports, and refiners. While the most important targets sit in China, which purchases 90 percent of Iran’s exported oil, there are other worthwhile targets in the United Arab Emirates, Oman, Malaysia, Singapore, Turkey, and Iraq that contribute to Iran’s sanctions-busting capacity, even amid a blockade.

Short of targeting a financial institution, Treasury could move to sanction a Chinese conglomerate like Wanda Holdings Group (Wanda). Wanda appears to operate a vertically integrated supply chain that is built, in part, on the supply of sanctioned Iranian oil. Wanda, like many Chinese conglomerates, operates joint ventures with major Chinese state-owned enterprises. Sanctioning a firm like Wanda would likely do more to compel China to pressure Iran than sanctioning another teapot refinery.

Max Meizlish is a research fellow for the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD). Behnam Ben Taleblu is FDD’s Iran Program senior director and a senior fellow. For more analysis from Max and Behnam, please subscribe HERE. Follow FDD on X @FDD, @FDD_CEFP, and @FDD_Iran. Follow Max and Behnam on X @maxmeizlish and @therealBehnamBT. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.