This sprawling Chinese refinery is bankrolling Tehran

Chinese leader Xi Jinping convened a meeting last year, gathering private sector executives to address China's economic challenges. Among the attendees was Chen Jianhua, founder of Hengli Group. Although Hengli may not be well-known outside of China, it has grown into an industrial powerhouse, with operations encompassing petrochemicals, textiles and shipbuilding, employing over 300,000 people and generating annual revenues exceeding $100 billion.

Beyond its diverse portfolio, Hengli has emerged as a significant importer of illicit Iranian crude. According to industry analysts, state-sanctioned shipping brokers and the U.S. Treasury, the company's refinery business has been sanctioned due to its involvement in purchasing billions of dollars' worth of Iranian petroleum. However, Hengli's petrochemical operations remain unsanctioned.

U.S. officials claim Hengli is among the largest players in China's extensive network of "teapot" refineries, which have been purchasing sanctioned oil for years.

China's acquisition of Iranian oil, largely facilitated by these teapot refineries, surpassed $30 billion in 2021, satisfying nearly all of the country's exported petroleum and aiding Iran's theocratic regime, as reported by the U.S.-China Economic and Security Review Commission. Hengli and similar Chinese companies benefit from buying oil at discounted rates compared to market prices, enhancing their profits.

The company declined to comment on the matter, asserting it adheres to relevant regulations, has not engaged in trade with Iran and that its suppliers have provided similar assurances. Hengli's bond prospectus states its crude oil primarily originates from the Middle East, including Saudi Aramco and unnamed other suppliers.

Chen, Hengli's founder and chairman, is now one of China's wealthiest individuals, with an estimated fortune of $20 billion, up from $2 billion a decade ago, per Forbes. His wife, Fan Hongwei, who chairs the petrochemical and refining business, possesses a net worth exceeding $5 billion. Industry insiders reveal that Hengli began purchasing sanctioned oil as early as late 2020, further increasing its procurement after Russia's invasion of Ukraine in 2022.

This shift in strategy was partly due to Hengli's petrochemical sector facing substantial debt and its heavy reliance on Russian and Iranian crude, which Hengli often acquires at discounts up to 25% compared to market rates.

While China imports more than 4 billion barrels of oil each year, Hengli's purchases constitute a small fraction of this total. However, they illustrate the lucrative opportunities for businesses that dare to defy international sanctions. Additionally, Hengli and other teapot refineries exemplify how China continues to provide financial support to Tehran.

Unlike state-owned firms, which generally avoid sanctioned oil to maintain access to the U.S.-led global financial system, China's over 100 teapot refiners have fewer assets at stake if sanctioned.

Iran's oil exports have been significantly curtailed following the U.S. imposition of naval blockades on Iranian ports, though the duration of this measure remains uncertain. The Chinese government has not provided comment on this issue, and its Foreign Ministry has previously stated that it is unaware of any oil trade between China and Iran.

Moreover, China's government has publicly expressed opposition to what it deems as "illegal and unreasonable unilateral sanctions," and would take necessary actions to safeguard China's energy security.