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China has told its companies not to comply with US sanctions on five Chinese oil refineries accused of buying Iranian crude.
Some shit you should know before you dig in: If you’re unaware, China is by far the biggest buyer of Iranian oil, taking in roughly 80 to 90% of everything Iran ships out. The refineries doing most of that buying are independent operations called “teapots” (they get this name because they’re smaller than the giant state-owned facilities). These teapots make up about a quarter of China’s total refining capacity and rely heavily on the discounted crude that comes out of sanctioned countries like Iran and Russia. The crude itself moves on what’s called a “shadow fleet” (tankers basically spoof their GPS signals and hand cargo off between ships, usually somewhere in the Persian Gulf or Strait of Malacca, so nobody can trace where the oil actually came from). Once it’s laundered through that process, the Iranian crude often gets mixed in with oil from other countries or stamped with forged paperwork labeling it “Malaysian blend.” The Trump administration sanctioned four of the five teapots last year as part of a broader “maximum pressure” campaign, and on April 24 slapped sanctions on the fifth and largest, Hengli Petrochemical (Dalian) Refinery, accusing it of funneling hundreds of millions of dollars to Iran’s military by buying its oil. Treasury also put banks on notice Tuesday, warning them they could end up sanctioned themselves for processing payments tied to any of these refineries.
What’s going on now: China’s Ministry of Commerce announced an order Saturday telling Chinese firms not to comply with the US sanctions on Hengli Petrochemical and the four other refineries (Shandong Jincheng Petrochemical Group, Hebei Xinhai Chemical Group, Shouguang Luqing Petrochemical, and Shandong Shengxing Chemical), saying the measures violate international law. The order says the sanctions “shall not be recognized, enforced, or complied with” and frames the move as necessary to defend the country’s sovereignty and security. It’s the first time China has done this, and some say it could signal a serious shift in how China fights back against US laws being applied beyond American borders.
After reviewing the sanctions, the ministry said Washington’s actions amount to “improper extraterritorial application” of US law, adding that “the Chinese government has consistently opposed unilateral sanctions that lack UN authorization and basis in international law.”
On Friday, the US State Department called the sanctions part of “decisive action to disrupt Iran’s illicit oil trade,” and warned that Washington plans to keep targeting Iran and anyone helping it skirt sanctions for as long as Tehran uses oil money to bankroll what the department called “destabilizing activities” across the region.
Treasury Secretary Scott Bessent posted on X that the Treasury “will continue to exert maximum pressure and any person, vessel, or entity facilitating illicit flows to Tehran risks exposure to U.S. sanctions,” and added that Iran’s primary export hub at Kharg Island is running out of room to store crude, a problem that could push Tehran to scale back production and bleed an estimated $170 million from its daily oil revenue.
This all comes as Trump is set to visit Beijing in less than a month for talks expected to focus on security and trade.
