U.S. Targets Chinese Teapot Refinery in Latest Sanctions Over Iranian Oil

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has imposed a new round of sanctions targeting several entities and vessels linked to China, Hong Kong, Panama, and the Marshall Islands. The move comes as part of Washington’s efforts to disrupt Iran’s so-called “shadow fleet” — a network facilitating clandestine oil shipments.

Among the sanctioned entities is Shandong Shengxing Chemical Co., Ltd., a privately owned Chinese “teapot” refinery accused of purchasing more than $1 billion worth of Iranian crude oil. Its inclusion highlights the growing scrutiny on smaller, independent players in China’s energy sector.

Background: What Are Teapot Refineries?

Teapot refineries are small, privately operated facilities in China that function under looser oversight than major state-run giants like Sinopec, CNPC, and CNOOC. These independent refineries typically receive smaller import quotas and are often accused of underreporting output, masking financial data, and leveraging alternative funding methods to bypass regulatory scrutiny. Their agility and lack of transparency make them attractive partners for sanctioned oil producers, including Iran, seeking discreet channels to sell crude.