The U.S. Department of the Treasury’s Office of Foreign Assets Control has issued an alert warning financial institutions about sanctions risks tied to independent Chinese “teapot” oil refineries, mainly in Shandong Province, because of their continued role in importing and refining Iranian crude oil. The alert tells firms to apply risk-based controls to avoid facilitating transactions involving designated teapot refineries or other teapot refineries that may be importing Iranian oil, carry out enhanced due diligence on transactions involving China-based refineries, particularly in Shandong, and clearly communicate sanctions compliance expectations to correspondent banks. Treasury says China buys about 90 percent of Iran’s oil exports and that teapot refineries account for most of those purchases. The alert highlights evasion methods in this trade, including front companies in Asia and the United Arab Emirates, intermediary brokers, and a shadow fleet using 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 USD of Iranian-origin oil. Financial institutions are also warned that Treasury may use the full range of available authorities, including secondary sanctions against foreign financial institutions that continue to support Iran’s activities.
U.S. Department of the Treasury 2026-04-28
U.S. Department of the Treasury warns financial institutions on Chinese teapot refinery sanctions risks and possible secondary sanctions
The U.S. Department of the Treasury’s Office of Foreign Assets Control has issued an alert warning financial institutions of sanctions risks linked to Chinese “teapot” oil refineries in Shandong Province for importing and refining Iranian crude. The alert urges risk-based controls, enhanced due diligence on China-based refinery transactions, and clear sanctions compliance expectations for correspondent banks, and details evasion methods including front companies, intermediary brokers, and a shadow fleet. Treasury notes that multiple China-based teapot refineries processing billions of USD of Iranian-origin oil have been designated since March 2025 and warns that foreign financial institutions may face secondary sanctions for continued support of Iran’s activities.