Maximum Pressure on Tehran Regime in Motion as Trump Builds Negotiating Leverage

Sanctions don’t impede negotiations; they help set the terms.

The Treasury Department sanctioned the China-based Shandong Shengxing Chemical Co. oil refinery on April 16 for purchasing some $800 million worth of oil from a front company linked to the Islamic Revolutionary Guard Corps-Quds Force, which oversees Tehran’s extraterritorial terror operations. This is the second time the Trump administration has targeted a “teapot,” or small independent oil refinery in China, which is currently the largest importer of Iranian oil.

The designation, which also targeted firms based in Malaysia, Hong Kong, Panama, and the Marshall Islands aiding Iran’s “shadow fleet” of unofficial oil tankers, marked the sixth oil-related enforcement action on Iran since President Donald Trump signed the National Security Presidential Memorandum-2 (NSPM-2) in February to restore maximum pressure sanctions.

Critically, the sanctions came as Tehran and Washington prepared for their second round of nuclear talks on April 19 in Rome. Unlike the Biden and Obama administrations, which watered down their economic leverage against Tehran during talks, the Trump team is enforcing oil penalties while simultaneously seeking a diplomatic resolution to the Iranian nuclear crisis.

Washington’s Escalating Crackdown on Iran-China Oil Trade

The Biden administration’s incremental sanctions against Iran’s ghost fleet between October and December 2024 came too little, too late to shift Tehran’s negotiating calculus. Conversely, since signing NSPM-2, Trump has issued five separate sets of sanctions — two in February, two in March, and one in April — targeting Iran’s shadow fleet across Asia, the Middle East, Africa, and offshore jurisdictions in the Caribbean and Indian Ocean.

For example, a March 13 joint action by the Treasury and State Departments sanctioned entities supporting ship-to-ship transfers by ghost fleet vessels in addition to designating Iran’s Petroleum Minister Mohsen Paknejad. A March 20 action went further by targeting a teapot refinery in China and its CEO.

Washington Intensifies Pressure via Shipping Warnings

In response to Iran’s continued exploitation of private shipping networks, Washington is expanding efforts to warn international shippers against facilitating — whether complicitly or unwittingly — Tehran’s evasion efforts and transfer of oil to international buyers. On April 16, the administration updated a 2019 advisory reaffirming the goals of the maximum pressure policy while highlighting Tehran’s deceptive shipping and financial practices.

The revised advisory provides greater insight into Tehran’s use of shadow fleets to smuggle petrochemicals and liquefied petroleum gas; references the role of shell companies and oil brokers in sanctions evasion; and explicitly warns of sanctions consequences for violators. When combined with the string of escalating penalties already levied, the advisory enables the Trump administration to bolster private sector enforcement of existing U.S. sanctions.

Maintaining Restrictions on Iran’s Oil Trade, Deal or No Deal

Holding the entirety of Iran’s sanctions-busting and illicit oil-exporting networks accountable will increasingly require targeting entities in China like refineries, ports, and port operators, as well as financial institutions and their executives. Targeting such major actors, rather than those with limited global exposure, constitutes a more effective approach to increasing the cost for the end user of sanctioned Iranian petroleum products.

Shrinking the number of actors benefiting from Iran’s oil exports — a vital lifeline for the country’s fragile economy — offers a powerful means to build leverage as negotiations unfold. Such action also limits the resources available for Tehran to grow its nuclear, missile, terror, and other destabilizing programs, regardless of the status of talks.

Janatan Sayeh is a research analyst at the Foundation for Defense of Democracies (FDD), where Behnam Ben Taleblu is senior director of the Iran Program and a senior fellow. For more analysis from the authors and FDD, please subscribe HERE. Follow Janatan and Behnam on X @JanatanSayeh and @therealBehnamBT. Follow FDD on X @FDD and @FDD_Iran. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.