US sanctions China-based oil refinery and 40 shippers over Iranian oil

U.S. Imposes Sanctions on Chinese Oil Refinery, Dozens of Shipping Companies Over Iranian Oil Trade

The Trump administration has imposed economic sanctions on a major Chinese oil refinery and approximately 40 shipping companies and tankers involved in transporting Iranian oil, officials announced Friday. This move represents a significant escalation in the administration’s campaign to choke off Iran’s primary source of revenue.

Hengli Petrochemical’s facility in Dalian, one of China’s largest independent refineries with a processing capacity of about 400,000 barrels of crude oil per day, is among the entities targeted. According to the Treasury Department, Hengli has received Iranian crude oil shipments since 2023, generating hundreds of millions of dollars in revenue for the Iranian military.

The sanctions cut off these companies from the U.S. financial system and penalize anyone who conducts business with them. The announcement comes just weeks before President Donald Trump and Chinese President Xi Jinping are scheduled to meet in China, potentially adding tension to already complex bilateral relations.

The move fulfills Trump’s threat to impose secondary sanctions on entities doing business with Iran. Concurrently, the U.S. has implemented a physical blockade on the Strait of Hormuz, a crucial Persian Gulf waterway for global energy supplies.

“We will continue to constrict the network of vessels, intermediaries and buyers Iran relies on to move its oil to global markets,” Treasury Secretary Scott Bessent said in Friday’s announcement.

China has emerged as Iran’s primary oil customer, importing 80% to 90% of Iranian oil before the outbreak of the U.S.-Israeli conflict with Iran. Although Iranian origin is often obscured by shipping the crude through intermediary countries like Malaysia, it ultimately reaches Chinese buyers, particularly smaller “teapot” refineries.

The advocacy group United Against Nuclear Iran highlighted in February that Hengli is just one of dozens of Chinese purchasers of Iranian oil.

These sanctions represent the latest development in a broader pressure campaign by the Treasury Department. Earlier this month, Bessent’s department sent warning letters to financial institutions in China, Hong Kong, the UAE, and Oman, threatening secondary sanctions for facilitating Iranian business and accusing these countries of allowing Iranian illicit activities to flow through their financial systems.

“We have told countries that if you are buying Iranian oil, that if Iranian money is sitting in your banks, we are now willing to apply secondary sanctions, which is a very stern measure,” Bessent explained during a White House press briefing on April 15.

The sanctions come at a precarious time for global energy markets. The conflict around the Persian Gulf has disrupted oil and natural gas shipments, causing prices to surge worldwide. In an attempt to mitigate these price increases, the Treasury has issued temporary sanctions waivers on Russian oil and a one-time waiver on Iranian oil already at sea.

China has consistently opposed U.S. sanctions policies, viewing them as unilateral actions that undermine international trade norms. After earlier U.S. sanctions against a Chinese refinery, Liu Pengyu, a spokesperson for China’s embassy in Washington, criticized the measures, saying they “undermine international trade order and rules, disrupt normal economic and trade exchanges, and infringe upon the legitimate rights and interests of Chinese companies and individuals.”

Despite these objections, China’s major companies and financial institutions typically comply with U.S. sanctions given their exposure to the U.S.-dominated global financial system.

The sanctions also come amid Iran’s stated position that any resolution to the ongoing conflict would require the lifting of sanctions, highlighting the economic pressure’s role in broader geopolitical negotiations.

As tensions continue to mount in the region, the effectiveness of these sanctions in curtailing Iran’s oil exports – and the potential for retaliatory measures from China – will be closely monitored by energy markets and international observers alike.