US targets China’s shadow trade with Iran in sweeping economic sanctions

The sanctions come before US President Donald Trump and Chinese President Xi Jinping are due to meet in Beijing next month. Photo / Getty Images

The US Treasury Department has imposed broad sanctions on 40 shipping firms and vessels, as well as a Chinese oil refinery, in a widening crackdown on maritime business with the Iranian regime.

The majority of sanctioned vessels are either Chinese-linked operations or have a history of delivering crude oil to China as the final destination.

It comes nearly a week after the seizure of the Touska, a sanctioned vessel bound for Iran that had stopped at a Chinese port known as a loading point for chemicals that could be used as rocket fuel precursors.

US President Donald Trump, speaking to CNBC on Monday, said US authorities found “a gift from China” on the ship, “which wasn’t very nice”.

The sanctions follow the seizure this week of two vessels – M/T Majestic and M/T Tifani – in the Indian Ocean, which US officials say were carrying a combined load of nearly four million barrels of Iranian crude.

In a statement on Saturday, Treasury Secretary Scott Bessent said: “[Operation] Economic Fury is imposing a financial stranglehold on the Iranian regime, hampering its aggression in the Middle East, and helping to curtail its nuclear ambitions.”

The sanctions are the largest tranche of such measures targeting Iran’s shadow fleet since the war began.

It comes at a complex moment in US-China relations, with Trump set to meet Chinese President Xi Jinping at a summit in Beijing next month. The meeting was already delayed from March because of the war in Iran.

The recent ship seizures have angered China, which has previously deemed such US sanctions illegal and this week condemned the “forcible interception” of the Touska.

China’s Foreign Ministry has sought to distance Beijing from the sanctioned vessels. Spokesman Guo Jiankun said: “As far as I know, the vessel seized by the US is a foreign container ship. China rejects any false association and speculation.”

China is the world’s largest buyer of Iranian crude and a key source of chemicals and hardware used in Tehran’s military. Analysts estimate that, before the war, China imported about 1.4 million barrels of Iranian oil a day, about 13% of its total imports, though the figures are not officially reported.

That trade flows through a shadow network of hundreds of tankers, shell companies and intermediaries operating outside normal legal channels and largely beyond the reach of sanctions enforcement.

Much of the oil ends up at China’s “teapot” refineries – small processors that are more willing to take discounted, grey-market crude.

Among the groups targeted by the new sanctions is Hengli Petrochemical (Dalian) Refinery Co, one of China’s largest teapot refineries. The US Treasury Department said the group had purchased billions of dollars in Iranian petroleum.

Few Chinese vessels have crossed the Strait of Hormuz since the war began, under what Beijing confirmed was an agreement with Tehran. But since Trump imposed a US blockade on ships entering and exiting Tehran’s ports, several Chinese-linked ships appear to have abandoned efforts to transit the strait, including the US-sanctioned Rich Starry.

The US has issued sanctions against hundreds of vessels, entities and individuals alleged to be part of Iran’s shadow fleet, but physical seizures of Chinese-linked vessels or cargo by US forces are rare.

Beijing, for its part, does not stop US-sanctioned ships from entering its ports or doing business with Chinese entities.

US authorities have vowed to continue widening their crackdown on the shadow networks facilitating Iran’s oil trade, and they say they will keep trying to disrupt the flow of Iranian crude.

- The Washington Post

Sign up to Herald Premium Editor’s Picks, delivered straight to your inbox every Friday. Editor-in-Chief Murray Kirkness picks the week’s best features, interviews and investigations. Sign up for Herald Premium here.