The Trump administration is preparing another escalation of sanctions against Iran as Chinese refiners—the buyers of most Iranian oil exports—are already confronting tighter supplies and existing U.S. restrictions on the trade.
Treasury Secretary Scott Bessent said in an Aug. 20 CNBC interview that Washington would announce the “toughest sanctions in history” against Iran on Aug. 24. He said the economic measures would work alongside the U.S. naval blockade to increase pressure on Tehran.
His statement followed President Donald Trump’s warning a day earlier that countries providing “any type of lifeline to Iran” would face economic consequences.
Asked whether Washington could impose measures on China over its continuing trade with Iran, Bessent did not disclose the administration’s plans. He said discussions involving China were better held privately and urged Beijing to cooperate, citing China’s reliance on energy supplies from the Persian Gulf.
China is Iran’s largest oil customer. In an April 28 advisory, the Treasury Department’s Office of Foreign Assets Control (OFAC) said China purchases approximately 90 percent of Iran’s oil exports, with independent Chinese refiners accounting for most of those purchases.
The independent plants, many concentrated in Shandong Province, are generally smaller than China’s state-owned refining giants and are commonly called “teapot” refineries.
Iranian Oil Supplies to China Fall
Oil deliveries from Iran to China had already fallen since the United States launched military operations against the Iranian regime in late February.
Tanker-tracking firm Kpler estimated China’s intake of Iranian oil at about 785,000 barrels per day in June and roughly 823,000 barrels per day in July. Its provisional estimate for August so far was about 534,000 barrels per day, compared with an average of about 1.4 million barrels per day in 2025, according to Kpler data cited by Reuters.
The decline came amid wartime disruption and was followed by the resumption of a U.S. naval blockade against vessels traveling to or from Iranian ports and coastal areas.
China’s General Administration of Customs has not reported crude oil imports from Iran since 2022.
Erica Downs, a senior research scholar at Columbia University’s Center on Global Energy Policy, said in a January blog post that Iranian barrels were relabeled to disguise their origin, with many recorded as Malaysian and some potentially recorded as originating elsewhere. She noted that China reported importing about 1.3 million barrels per day of “Malaysian” crude in 2025, more than twice Malaysia’s reported oil production.
Chinese Refineries Already Targeted
The coming sanctions package follows a series of U.S. actions against Chinese companies involved in Iran’s oil trade.
On April 24, OFAC designated Hengli Petrochemical (Dalian) Refinery Co. Ltd., a China-based independent refinery, as one of Iran’s largest customers for crude and other petroleum products. Four other Chinese independent refineries had previously been designated.
In its April 28 advisory, OFAC said the designated Chinese refineries had collectively purchased and refined billions of dollars’ worth of Iranian oil since March 2025.
Treasury has also targeted companies handling Iranian oil after it reaches China. In October 2025, OFAC designated a Chinese refinery, a crude-oil terminal operator, and a Qingdao shipping agent over their alleged roles in receiving or unloading Iranian oil.
The April 28 advisory also warned banks to scrutinize transactions involving Chinese independent refineries, particularly those in Shandong Province. OFAC said foreign financial institutions facilitating certain transactions could face U.S. sanctions consequences.
Yuan and Shadow Networks
China’s role in Iran’s oil trade also extends to how Tehran receives and moves the proceeds.
OFAC said on May 1 that Iran primarily settles its oil sales in Chinese yuan. Treasury said Iranian exchange houses then help convert some of those proceeds into other currencies for sanctioned Iranian entities.
In the same action, OFAC designated three Iranian exchange houses and associated front companies that used foreign commercial bank accounts to conduct transactions for sanctioned banks, petroleum exporters, and military and security bodies.
Treasury said those arrangements are part of a broader Iranian shadow banking system used to handle proceeds from overseas oil and petrochemical sales.
Iranian oil shipments also rely on methods intended to conceal the origin and movement of cargoes. Treasury’s April advisory cited ship-to-ship transfers, falsified shipping documents, intermediary companies, and manipulation of vessel identities.
The Chinese Foreign Ministry has opposed Washington’s pressure campaign. Asked Aug. 20 about threatened U.S. measures against Iran’s trading partners and their possible effect on China, spokesman Lin Jian said sanctions and pressure would not resolve the conflict and called for a political and diplomatic settlement.
