The United States Treasury Department warned global financial institutions Wednesday about the sanctions risks of doing business with independent Chinese oil refineries that Washington claims are quietly keeping Iran's oil revenue machine running — and put banks on notice that secondary sanctions could follow if they fail to act.
The Office of Foreign Assets Control (OFAC) issued a formal alert targeting so-called "teapot" refineries, small independent crude processors concentrated primarily in China's Shandong Province, which the US alleges have become the backbone of Iran's sanctions-busting oil trade.
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The warning marks a significant escalation in Washington's financial pressure campaign against Tehran.
China purchases approximately 90% of Iran's oil exports, with teapot refineries accounting for the majority of those imports, OFAC claimed. That revenue, Treasury alleged, ultimately bankrolls the Iranian regime's weapons programmes and its military.
Compounding the concern, the alert claimed, some Chinese teapot refineries have used the U.S. financial system to conduct dollar-denominated transactions and procure American goods — directly implicating U.S. banks in the chain.
OFAC's alert directed financial institutions to implement risk-based controls to avoid facilitating transactions involving designated teapot refineries, conduct enhanced due diligence on transactions involving China-based refineries — particularly in Shandong Province — and clearly communicate sanctions compliance expectations to correspondent banks.
The alert also catalogued what Washington alleged to be the evasion playbook these networks rely on: front companies operating across Asia and the United Arab Emirates, intermediary brokers, and a "shadow fleet" the US claimed employs ship-to-ship transfers, falsified documentation, and vessel identity manipulation to disguise the origin of Iranian crude.
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Treasury said it "is prepared to deploy secondary sanctions against foreign financial institutions that continue to support Iran's activities."
Since March 2025, OFAC has, reportedly, designated multiple China-based teapot refineries that Washington claims have collectively processed billions of dollars' worth of Iranian-origin oil.
The warning arrives alongside broader U.S. pressure on Iran's finances, including the recent sanctioning of 35 entities tied to Tehran's alleged shadow banking network, and sits squarely within the administration's maximum pressure doctrine.
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