Chinese refiner Hengli accused of funding Iran through sanctioned oil purchases

The U.S. Treasury has accused Chinese refining company Hengli Group of purchasing billions of dollars worth of Iranian oil, placing it at the center of Washington's efforts to curb Tehran's oil exports. Hengli has denied the allegations, claiming compliance with regulations and supplier assurances. Industry experts and U.S. officials view Hengli as a key player in China's network of independent "teapot" refineries that acquire discounted sanctioned crude, which can be up to 25% cheaper than other options.

In 2023, China imported over $30 billion worth of Iranian oil, comprising nearly all of Tehran's petroleum exports. Hengli's refinery on Changxing Island is one of the five largest in China, generating approximately $30 billion in annual revenue. The conglomerate also operates in petrochemicals, textiles, and shipbuilding. The U.S. Treasury sanctioned Hengli's refining unit in April, but the broader company remains unaffected.

Shipping records reviewed by the Wall Street Journal revealed that sanctioned tankers delivered over five million barrels of Iranian crude to Hengli's port from 2023. One vessel, Seeker 8, stopped transmitting its location near the port for three days and later unloaded a large cargo, indicating the arrival of a significant shipment.

In May, China's Commerce Ministry instructed companies to disregard the U.S. blacklisting of Hengli and other refiners, citing a commitment to protect China's energy security. Despite the U.S. naval blockade, Iran's oil exports have dwindled, though the impact and longevity of these restrictions remain unclear.