U.S. Sanctions on Chinese Refiners Over Iran Oil Disrupt Trade, Force Evasive Tactics

The U.S. sanctions on two Chinese “teapot” refiners—Shandong Shouguang Luqing Petrochemical (March) and Shandong Shengxing Chemical (April)—for buying Iranian crude have begun to disrupt operations, forcing them to reroute cargoes, secure financing from smaller banks, and sell products under different company names to evade restrictions.

Key Impacts:

• Port Bans & Shipping Chaos: State-run Shandong Port Group blocked sanctioned refiners from unloading Iranian crude, forcing vessels like the Bei Hai Ming Wang to divert to private terminals like Wantong Crude Oil Terminal.
• Financial Squeeze: Major banks cut off Luqing’s credit lines, pushing it to rely on smaller lenders. CNOOC halted crude supplies to Luqing’s affiliate refinery.
• Market Ripples: At least five Shandong refiners stopped buying Iranian oil, widening discounts for Iranian Light crude to 2.30–2.30–2.40/barrel below Brent (vs. $2 last month).
• Shadow Sales: Sanctioned firms now trade via shell entities like Shouguang Jiaqing Petroleum Sales and Shandong Xuxing Petrochemical to mask exports.

Broader Fallout:

• China’s Stance: Beijing rejects unilateral sanctions but hides Iranian imports under “Malaysian” labels in customs data.
• Iran’s Lifeline: About 90% of Iran’s oil exports go to China, making U.S. enforcement critical to pressuring Tehran’s nuclear talks.