US warns banks of sanctions risk over China ‘teapot’ refineries handling Iranian oil
This photo taken on March 26, 2026 shows an oil tanker unloading crude oil at the port of Yantai, eastern Shandong province.
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The US Treasury warned financial institutions on Tuesday that they could face sanctions if they do business with Iranian oil refiners in China.
The Ministry of Finance urged financial institutions in a statement to avoid facilitating transactions involving private refiners, known as “teapots,” that import Iranian oil, as such transactions could put them at risk.
China buys about 90% of Iran’s oil exports, the Treasury said, with most of these imports being refined.
“This revenue ultimately benefits the Iranian regime, its weapons programs, and its military. Some Chinese tea refineries have used the US financial system to make dollar transactions and buy US goods,” Treasury said.
It also asked the agencies to “conduct enhanced due diligence” on transactions involving China-based refineries, particularly those in Shandong province, and other Asia- and Middle East-based entities involved in Iran’s oil supply chain to China.
US Treasury Secretary Scott Bessent said in X that the Treasury Department “will continue to apply significant pressure and any person, vessel, or organization that conducts illegal flows to Tehran from exposure to US sanctions.”
Bessent said Iran’s main export port on the island of Kharg is “nearing final capacity,” which could force Tehran to cut production and lose about $170 million in daily revenue.
‘Malaysian Combination’
The move comes as Washington aims to cut off Iran’s revenue streams as part of a “maximum pressure” campaign launched by US President Donald Trump in February, weeks before the start of the war with Iran.
Last week, the US sanctioned one of China’s largest tea factories, the Hengli Petrochemical (Dalian) Refinery, describing it as one of Iran’s largest customers for crude oil and petroleum products.
Four other tea refineries have also been approved. The Ministry of Finance also widened the dragnet to include port operators in Shandong province and logistics service providers linked to Iranian oil exports.
Iranian crude is often transported to China’s tea refineries using “shadow bulk” tankers, which are authorized vessels that change their location data to avoid detection.
Most shipping involves multiple ship-to-ship transfers, sometimes using derelict ships, often in the Persian Gulf or the Strait of Malacca, to hide their origin.
In some cases, Iranian oil is mixed with imported materials or relabelled with fake documents to improve its origin, commonly known as ‘Malaysian blend,’ ” the Treasury said.
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, in a meeting with Iran’s Foreign Minister Abbas Araqchi, Chinese Foreign Minister Wang Yi said that Beijing is against “the abuse of force and illegal joint sanctions.”
Washington and Tehran are currently negotiating an indefinite ceasefire announced by Trump, although tensions remain high. Iran has yet to reopen the Strait of Hormuz, and the US remains embargoed on Iranian ports.
— CNBC’s Anniek Bao and Evelyn Cheng contributed to this report
