The U.S. Department of the Treasury’s Office of Foreign Assets Control recently issued an alert warning financial institutions of the sanctions risks associated with independent “teapot” oil refineries in China, in light of their ongoing participation in the import and refining of Iranian crude oil. According to OFAC, China purchases approximately 90 percent of Iran’s oil exports, with a majority of these imports purchased by teapot refineries located in China’s Shandong Province. Since March 2025, sanctioned teapot refineries have collectively purchased and refined billions of dollars’ worth of Iranian oil, according to OFAC. Iran primarily uses the revenue to support its military and weapons programs. OFAC also emphasized that it is prepared to deploy secondary sanctions against foreign financial institutions that continue to facilitate these types of transactions.
The Alert provides a list of OFAC designated teapot refineries and discusses common evasion tactics used in the Iranian oil trade. OFAC also urges financial institutions to take the following steps to ensure that they are not supporting transactions involving these entities:
- implement risk-based controls to avoid transactions involving OFAC designated teapot refineries;
- conduct enhanced due diligence on transactions involving China-based refineries; and
- clearly communicate sanctions compliance expectations with correspondent banks.
OFAC also issued Frequently Asked Question 1249 to confirm that the U.S. government does not authorize “toll” payments made to the Government of Iran or the Islamic Revolutionary Guard Corps (IRGC) for safe passage through the Strait of Hormuz. According to the FAQ, foreign financial institutions and other non-U.S. persons also risk exposure to sanctions if they engage in certain transactions involving designated persons.
U.S. Department of Treasury Press Release | OFAC Alert | FAQ 1249