How To Squeeze Iran Financially. Is US Taking Aim At Chinese ‘Teapot’ Entities

President Donald Trump has said the US would hit Iran hard economically. Trump’s latest claim on Iran came a day after Treasury Secretary Scott Bessent said that Washington would impose measures on Tehran that have “never been seen.” These steps are expected as early as next week, according to reports.

Apart from the US, the United Nations and European Union have imposed a string of sanctions against Iran, and taken steps including trade embargoes and frozen assets since the late 1970s. All of it were punitive measures aimed at curbing ​Iran’s nuclear program, human rights violations and support for militant groups, according to a Reuters report.

Trump’s latest announcement is likely to target independent Chinese refineries, known as “teapots.” Teapots account for a quarter of Chinese refinery capacity and they conduct operations with narrow and even negative profit margins, per the report.

The thinking behind the move is to stem the flow of money accrued by Iran by selling oil, mostly through illegal means.

According to 2025 data from analytics firm Kpler, China accounts for more than 80% of Iran’s ​shipped oil. The aforementioned independent refiners absorb much of this trade. Washington is aiming to target these teapot entities through secondary measures. They will be penalized for aiding a primary sanctions target, which in this case is Iran, according to the Reuters report.

In the past, such moves have had some impact as US sanctions forced bigger independent refiners to desist buying Iranian oil.

The catch here, as the news agency’s report itself points out, is that these independent refineries are now mostly immune from sanctions imposed by Washington. The reason cited by sanctions experts is that they have little exposure ​to the US financial system. Such teapot operators conduct operations through shading dealings to evade the global financial system controlled by Washington.

The other options Washington is likely to tap is to impose sanctions on Chinese banks. The Office of Foreign Assets Control (OFAC), which is the financial enforcement arm of the US Department of Treasury, has imposed secondary sanctions on lesser known entities based in Hong Kong and mainland China. These entities allegedly process billions of dollars in Iranian oil. Funds accrued from such operations are aiding Iran to procure weapons.

The US Treasury Department has reportedly warned that two larger Chinese banks may also face secondary sanctions, though it has not designated them as such.

If it deems it fit, the US Treasury Department could cite that funds of Iranian entities were being routed through these banks, to validate a probable imposition of sanctions. These banks have not been identified, but the US authorities seem to be veering to the idea that any steps imposed on these entities would have a cascading effect and impact Iran’s ability to raise funds and procure weapons.

Some have also warned that such measures could prompt China to take retaliatory steps, which would be detrimental to Washington in the current global scenario.

President Donald Trump is slated to visit China, and hence the US may not want to ratchet up financial tensions ahead of the visit.

In the looming Artificial Intelligence (AI) battle, the US is preparing the groundwork to let its partners know that they can’t have pacts with China if they are keen to join the US-led AI coalition. In other words, those who want to dabble with China can rest assured that they will be excluded from US-led AI initiatives. So a section of the international policy experts think probable Chinese retaliatory steps could revolve around curbs on export of ​critical minerals.

This is not a scenario that the US would envisage at a time when the US and its allies are pursuing developing their own supply chains, through Pax Silica and other coordinated steps.

The US has already enforced a naval blockade of Iran and sanctions aimed at curbing aviation routes could be another step. Another reported line of thinking is a land blockade, but that is also fraught with complications as it need wider support from neighboring countries of Iran, including Iraq, Turkey, Pakistan, Afghanistan, Turkmenistan, Azerbaijan ​and Armenia.