On Friday, the U.S. Treasury Department announced sanctions targeting a Chinese refinery known as Henli Petrochemical, located in Dalian. This action stems from its continued purchases of Iranian crude oil.
“This independent teapot refinery in China is significantly contributing to Iran’s oil economy. Henli is among the largest buyers of Iranian crude and other petroleum products, spending billions on Iranian oil,” noted a spokesperson from the Office of Foreign Assets Control (OFAC).
“Additionally, OFAC is also targeting around 40 shipping companies and their vessels linked to Iran’s shadow fleet, which are critical for Iran’s finances as its regime faces instability,” the statement added.
Treasury Secretary Scott Bessent remarked that the sanctions are part of what they call Operation Economic Fury. This initiative aims to tighten the financial grip on the Iranian regime, deter its activities in the Middle East, and limit its nuclear goals.
“Following guidance from President Trump, the Treasury will continue to go after the network of vessels and intermediaries that Iran uses to move crude oil to international markets,” he said.
Bessent warned, “Those individuals and vessels involved in these underground trades risk facing U.S. sanctions.”
The term “teapot” refinery refers to smaller independent refineries in China. These refineries often seek out discounted oil from countries under sanctions, like Iran, Russia, and Venezuela. After losing access to Venezuelan oil when the Maduro regime fell, these refineries increasingly turned to Iranian oil.
The Treasury emphasized that many independent Chinese refineries are major buyers of Iranian crude, with Henli becoming a key customer for Iran.
“Since at least 2023, Henli has been receiving shipments of Iranian oil under the supervision of Separ Energy Jahan Nama Pars, which is connected to Iran’s military,” said the Treasury.
Located in Dalian, Tsunetoshi’s facility is one of the prominent independent refineries in China, capable of processing around 400,000 barrels per day. It has significantly increased its purchases of Iranian oil and has become a major player in China’s petrochemical sector.
A vast “shadow fleet” comprising unlawful tankers is responsible for transporting Iranian crude to these Chinese facilities. OFAC designated 19 specific vessels and the companies associated with them on Friday.
According to industry analysts, these latest sanctions represent a significant escalation against China’s energy sector. They are imposed just ahead of President Trump’s planned meeting with President Xi Jinping.
Some experts speculate that these sanctions might serve as leverage during the upcoming talks, while others interpret them as a clear signal of the administration’s determination to disrupt Iran’s access to oil revenue.
“With Henli pulling out of the dollar-based payment system, numerous manufacturers in chemical and textile industries across East Asia might face immediate supply challenges. This shift could benefit competitors in China, Japan, and South Korea, yet it may also lead to higher inflation brought on by eight weeks of conflict in the Middle East,” a Bloomberg report highlighted.
Following the announcement of the Treasury sanctions, Koryoku stock dropped sharply, while gaining by 10% when the news spread on Monday. The Chinese Foreign Ministry condemned the sanctions as “unlawful unilateral actions lacking any basis in international law.”
The spokesperson for the Chinese Foreign Ministry, Lin Jian, stated, “We urge the United States to cease its imposition of sanctions and overreach in jurisdiction. China will firmly defend the legitimate rights and interests of its companies.”
