US warns of sanctions risks for Chinese refiners of Iranian oil

[NEW YORK] The US warned financial institutions of sanction risks on Chinese oil refineries over ties to Iran, ramping up economic pressure on Teheran and risking tension with Beijing ahead of an expected summit between the country’s leaders.

The Treasury Department’s Office of Foreign Assets Control announced on Tuesday (Apr 28) that independent refiners in China, mainly in Shandong province, run the risk of being blacklisted over their role importing and processing Iranian oil.

“Financial institutions should be on notice that the department is leveraging the full range of available tools and authorities and is prepared to deploy secondary sanctions against foreign financial institutions that continue to support Iran’s activities,” the Treasury Department said in a statement.

The department urged financial institutions to avoid facilitating transactions between Chinese refiners that might import crude from Iran, to conduct enhanced due diligence, and to communicate clearly with correspondent banks, according to the statement.

While China’s state-owned entities generally stay away from blacklisted oil, private refiners – including the army of smaller processors often dubbed teapots – have been Teheran’s most important consumers, making the most of discounted prices.

The move risks adding yet another irritant for China ahead of an expected summit between US President Donald Trump and China’s Xi Jinping next month.

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Last week, the US sanctioned one of China’s largest private oil refiners, Hengli Petrochemical (Dalian) Refinery, which operates a modern oil-processing and chemical complex in Liaoning province, citing its purchases from Iran.

Also on Tuesday, the Trump administration issued “firm guidance” warning of significant sanctions exposure related to paying a “toll” to the Iranian government to gain passage through the Strait of Hormuz.

Additionally, Treasury announced sanctions on 35 entities and individuals connected to Iran’s shadow banking networks as part of a broader effort to increase the financial strain on the Islamic Republic. BLOOMBERG