Beijing continues to serve as a critical hub in Iran’s efforts to sustain its oil exports amid increasingly stringent U.S. sanctions aimed at cutting off Tehran’s financial resources. The United States has recently intensified measures targeting a network of privately operated Chinese refiners, known as “teapots,” which have become instrumental in processing the majority of Iranian crude purchases.

These teapot refiners—numbering over 100—play a pivotal role in circumventing U.S. restrictions. In recent weeks, the U.S. Treasury Department sanctioned a unit of Hengli Petrochemical for purchasing billions of dollars’ worth of Iranian petroleum, alongside imposing sanctions on more than 40 shipping companies and vessels allegedly involved in the trade. Furthermore, financial institutions have been warned that facilitating transactions with these Chinese refiners could result in penalties, signaling a broader effort to disrupt the Iran-China oil trade.

China’s Foreign Ministry has dismissed the sanctions as lacking legal standing and affirmed its commitment to protecting Chinese businesses’ interests. Analysts note that by channeling Iranian oil sales through these mostly private refiners, Beijing is able to balance its strategic partnership with Tehran against diplomatic pressures from the U.S. and Middle Eastern countries. This arrangement allows China to secure much-needed Iranian oil supplies while avoiding direct involvement by state-owned energy giants, which must adhere to international sanctions protocols.

Though Chinese customs records show no official crude oil imports from Iran since 2023, industry insiders and U.S. officials indicate that the flow of Iranian oil continues through elaborate methods designed to evade detection. These include tankers disabling tracking systems, transferring oil at sea between vessels, and using Iranian front companies to facilitate payments. The teapot refiners—less exposed than large state firms due to their minimal overseas assets and greater ability to transact in Chinese yuan—have thus insulated themselves from the full impact of sanctions.

This shadow oil economy has grown substantially amid escalating U.S. enforcement efforts. According to a U.S.-based advocacy group, nearly 600 vessels have been identified as potentially involved in the covert movement of Iranian crude and refined products as of early 2026, a dramatic increase from just 70 reported in late 2020. Analysts say the teapot refiners are vital to sustaining Tehran’s oil revenues, which remain a cornerstone of its economy.

Despite ongoing U.S. attempts to blockade Iranian ports and intercept tankers, China’s teapot network currently maintains access to Iranian oil shipments, including cargoes loaded before the imposition of more stringent maritime restrictions. However, should a prolonged blockade take effect, refiners may be forced to seek supplies from alternative sources. In 2025, roughly 12% of China’s oil imports were estimated to come from Iran, underscoring the significance of this covert trade to Beijing’s energy portfolio.

As the U.S. pursues an aggressive campaign to clamp down on this trade, the evolving dynamic highlights the complex interplay between sanctions enforcement, global energy markets, and the diplomatic balancing act involving China and Iran.