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3. U.S. Warns Banks Over Sanctions Risks Linked to Chinese 'Teapot' Refineries

The United States has issued a fresh warning to global financial institutions over the risks of engaging with independent Chinese oil refineries—known as “teapot” refineries—amid their continued role in processing Iranian crude.

In an alert published Tuesday, the Office of Foreign Assets Control (OFAC) said these refineries, largely concentrated in China’s Shandong province, remain central to Iran’s oil export network despite ongoing U.S. sanctions.

Billions in Iranian Oil

According to the U.S. Treasury, several teapot refineries have collectively purchased and refined billions of dollars’ worth of Iranian crude since early 2025. China is currently estimated to buy around 90% of Iran’s total oil exports, with smaller independent refineries accounting for the majority of those imports.

The warning comes as Washington intensifies its “maximum pressure” campaign on Tehran following the signing of National Security Presidential Memorandum-2 by Donald Trump in February 2025. The directive reinstated sweeping measures aimed at cutting off Iran’s access to revenue and curbing its regional influence.

OFAC warned that non-U.S. banks and financial institutions could also face sanctions if they facilitate transactions involving designated refineries or Iran’s broader petroleum sector.

“Financial institutions should take steps to ensure they are not facilitating transactions involving teapot refineries importing Iranian oil,” the agency said, urging enhanced due diligence and closer scrutiny of China-linked energy transactions.

The U.S. says it will continue targeting Iran’s key revenue streams, particularly its oil and petrochemical sectors, under authorities including Executive Order 13902. The latest alert underscores Washington’s focus not only on Iranian entities, but also on the global network of intermediaries, refineries, and financial actors that enable the trade to continue.