US warns banks about China's small oil refineries buying Iranian crude

The US Treasury Department issued an urgent warning Tuesday to financial institutions globally about the risks of doing business with small independent oil refineries in China, known as "teapot" refineries.

The financial institutions are allegedly purchasing the bulk of Iran's sanctioned crude oil exports.

The alert, published by the Treasury's Office of Foreign Assets Control (OFAC), identifies the refineries, concentrated mainly in China's Shandong Province, as central players in allegedly helping Iran generate revenue despite sweeping US sanctions.

"China is the world's largest purchaser of Iranian oil, currently acquiring around 90 percent of Iran's total oil exports," according to the alert, as OFAC designated five refineries since re-imposing maximum pressure on Iran in early 2025, freezing their US assets and barring American businesses from dealing with them.

Alongside the alert, the Treasury Department blacklisted 17 individuals and 19 companies across Iran, Hong Kong and the UK, accused of helping move Iranian oil money through front companies and shell firms.

OFAC accused Iran of using a "shadow fleet" of tankers employing deceptive practices, including allegedly falsifying vessel locations and disguising Iranian crude as oil from other countries, most commonly labeled as "Malaysian blend," to conceal shipments.

Banks were urged to scrutinize transactions involving Chinese energy companies and to strengthen communication with their Chinese correspondent banks about sanctions risks.