China is set to counter U.S. sanctions imposed on five Chinese “teapot” refineries accused of purchasing oil from Iran. The move highlights Beijing’s firm stance against what it perceives as unilateral measures lacking foundation in international law.
Background on U.S. Sanctions
The U.S. Treasury Department announced sanctions on April 24, targeting the five refiners. Among them, Hengli Petrochemical was highlighted as a key buyer of Iranian oil, allegedly contributing significantly to revenue for the Iranian military. Other affected refiners include:
- Shandong Jincheng Petrochemical Group
- Hebei Xinhai Chemical Group
- Shouguang Luqing Petrochemical
- Shandong Shengxing Chemical
China’s Response
On May 3, 2026, China’s Ministry of Commerce made a strong declaration. The ministry issued a “prohibition order” asserting that the U.S. sanctions would not be recognized or enforced. This decision aims to protect China’s national interests and sovereignty.
The Ministry criticized the U.S. for what it deemed improper restrictions on trade. It reinstated China’s continuous opposition to unilateral sanctions without United Nations endorsement.
Economic Impact and Market Dynamics
Chinese “teapot” refineries are smaller and operate independently compared to state-run giants like Sinopec. They account for about 25% of China’s total refinery capacity and have been essential for the nation’s energy needs.
China relies heavily on oil imports, sourcing more than half of its oil from the Middle East, with a significant portion coming from Iran. Notably, data from commodities analytics firm Kpler revealed that over 80% of Iran’s oil exports went to China in 2025.
These refineries purchase crude oil at discounted rates from countries under sanctions, including Iran, Russia, and Venezuela. However, the current sanctions pose challenges, particularly in marketing refined products due to strict origin labeling requirements.
Significance of the Issue
This situation underscores the ongoing trade tensions between the U.S. and China, particularly in the energy sector. China’s defiance against U.S. sanctions may have broader implications for international trade relations and the geopolitics of energy supply.
