Shandong: Known as “teapot” refineries, some smaller Chinese oil companies continue to purchase Iranian oil despite US sanctions. These independent refineries, primarily located in Shandong province, process a significant share of Iran’s sanctioned oil, which is bought at reduced prices and managed through shell companies in Hong Kong. These small-scale operations play a crucial role in local employment and economic development, even as they face challenges from both Washington and Beijing.

According to Deutsche Welle, while new U.S. sanctions aim to curb these oil flows, China’s domestic consumption requirements and tax incentives have helped maintain refinery operations. However, the sector is under pressure from aging facilities, rising import taxes, and shrinking profit margins, which could lead to substantial changes in the industry landscape.

These teapot refineries have historically operated on a business model that takes advantage of the steep discounts on Iranian oil. Despite the financial benefits, the sustainability of this model is in question. The evolving international and domestic pressures create an uncertain future for these refineries, which have become a critical component of the local economy in Shandong province.