WASHINGTON—The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is alerting financial institutions to the sanctions risks associated with independent “teapot” oil refineries in China, primarily in Shandong Province, given their continued role in importing and refining Iranian crude oil.
China purchases approximately 90 percent of Iran’s oil exports, with teapot refineries accounting for the majority of these imports. This revenue ultimately benefits the Iranian regime, its weapons programs, and its military. Some Chinese teapot refineries have used the U.S. financial system to conduct dollar-denominated transactions and procure U.S. goods.
The alert urges financial institutions to:
- Implement risk-based controls to avoid facilitating transactions involving designated teapot refineries or for other teapot refineries that may be importing Iranian oil;
- Conduct enhanced due diligence on transactions involving China-based refineries, particularly in Shandong Province; and
- Implement clear communication of sanctions compliance expectations to correspondent banks.
The alert also highlights common evasion tactics used in this trade, including the use of front companies in Asia and the United Arab Emirates, intermediary brokers, and a “shadow fleet” employing deceptive shipping practices such as ship-to-ship transfers, falsified documentation, and vessel identity manipulation.
Since March 2025, OFAC has designated multiple China-based teapot refineries that have collectively processed billions of dollars’ worth of Iranian-origin oil, ultimately benefitting the Iranian regime.
Additionally, financial institutions should be on notice that the department is leveraging the full range of available tools and authorities and is prepared to deploy secondary sanctions against foreign financial institutions that continue to support Iran’s activities.