OFAC warns banks on China teapot refineries as Iran oil sanctions pressure intensifies

WASHINGTON, April 28, 2026 - The U.S. Treasury’s Office of Foreign Assets Control issued a new Iran-related alert warning U.S. and foreign financial institutions about sanctions risks tied to China’s independent “teapot” refineries, particularly those in Shandong province, citing their continuing role in importing and refining Iranian crude throughout 2026. OFAC also issued FAQ 1249 and updated the SDN List.

The alert says China is the world’s largest buyer of Iranian oil, taking about 90% of Iran’s total oil exports, and that teapot refineries buy most of that volume. OFAC said that, since March 2025, it has designated multiple teapot refineries that collectively purchased and refined billions of dollars’ worth of Iranian oil.

OFAC said five teapot refineries have been designated since the resumption of maximum pressure on Iran: Shandong Shouguang Luqing Petrochemical Co. Ltd., Shandong Shengxing Chemical Co. Ltd., Hebei Xinhai Chemical Group Co. Ltd., Shandong Jincheng Petrochemical Group Co. Ltd. and Hengli Petrochemical (Dalian) Refinery Co. Ltd. It said property and interests in property of those firms in the United States, or in the possession or control of U.S. persons, are blocked, while U.S. persons are generally barred from transacting with them unless authorized or exempt. Entities owned 50% or more by those refineries are also blocked.

The agency urged heightened scrutiny of transactions involving China-based teapot refineries and said additional steps could include warning correspondent banks in China about sanctions risks and collecting more information on customers, contracts and related transactions. It also flagged evasion tactics tied to Iran’s oil trade, including front companies in Asia and the United Arab Emirates, middlemen, shadow fleet tankers, ship-to-ship transfers, AIS manipulation, relabeling cargo as “Malaysian blend,” and the use of so-called zombie vessels.

Separately, FAQ 1249 says payments to the Government of Iran or the Islamic Revolutionary Guard Corps for safe passage through the Strait of Hormuz are not authorized for U.S. persons or U.S.-owned or -controlled foreign entities, and may create sanctions exposure for non-U.S. persons.