Treasury Warns of Sanctions Risks Linked to China-Based Independent “Teapot” Oil Refineries

WASHINGTON—The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is alerting financial institutions to the sanctions risks associated with independent “teapot” oil refineries in China, primarily in Shandong Province, given their continued role in importing and refining Iranian crude oil.China purchases approximately 90 percent of Iran’s oil exports, with teapot refineries accounting for the majority of these imports. This revenue ultimately benefits the Iranian regime, its weapons programs, and its military. Some Chinese teapot refineries have used the U.S. financial system to conduct dollar-denominated transactions and procure U.S. goods.The alert urges financial institutions to:Implement risk-based controls to avoid facilitating transactions involving designated teapot refineries or for other teapot refineries that may be importing Iranian oil;Conduct enhanced due diligence on transactions involving China-based refineries, particularly in Shandong Province; andImplement clear communication of sanctions compliance expectations to correspondent banks.The alert also highlights common evasion tactics used in this trade, including the use of front companies