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By Timothy Gardner
WASHINGTON (Reuters) -The U.S. on Thursday issued new sanctions intended to hit Iran's oil exports, including what the State Department said were the first U.S. measures targeting a Chinese "teapot refinery" processing the crude.
It was Washington's fourth round of sanctions on Iran's oil sales since President Donald Trump said in February he was re-imposing a "maximum pressure" campaign including efforts to drive down the country's exports to zero.
Trump aims to stop Tehran from obtaining a nuclear weapon and funding militant groups.
The refinery the Treasury targeted for sanctions is China-based Shandong Shouguang Luqing Petrochemical Co., Ltd.
"So-called 'teapot' refinery purchases of Iranian oil provide the primary economic lifeline for the Iranian regime, the world’s leading state sponsor of terror and the primary backer of the murderous Houthis in Yemen," U.S. Treasury Secretary Scott Bessent said in a post on X.
"This will be the United States’ first designation of a teapot refinery," the State Department said in a press release.
However, in 2022, the U.S. Treasury Department placed Shandong Haiyou Petrochemical, another Chinese teapot refiner, on its list of sanctioned entities.
State and Treasury officials did not immediately comment on Friday morning.
The United States has not in the past focused on small independent Chinese teapot refiners in part because they have little exposure to the U.S. financial system. Chinese state-run oil firms have stopped buying Iranian crude, on concerns of running afoul of sanctions.
China does not recognize U.S. sanctions and is the largest importer of Iranian oil. China and Iran have built a trading system that uses mostly Chinese yuan and a network of middlemen, avoiding the dollar and exposure to U.S. regulators.
"China has always been firmly opposed to illegal and unjustifiable unilateral sanctions and so-called long-arm jurisdiction by the U.S.," said a spokesperson for the Chinese embassy in Washington.
Earlier this month, China and Russia stood by Iran after Washington demanded nuclear talks with Tehran, with diplomats saying dialogue should only resume based on "mutual respect" and all sanctions ought to be lifted.
'MINIMAL PRESSURE'
Analysts have said Washington has pursued a path of incremental sanctions, avoiding imposition of measures on big Chinese banks that assist in transactions, a move that could provoke Beijing to retaliate economically.
"The strategy appears to target China as a means to pressure Iran - applying only minimal pressure for now while gradually increasing efforts to bring Iran to a nuclear deal," said Scott Modell, chief executive of Rapidan Energy, a research group.
State Department spokesperson Tammy Bruce said the refinery bought oil from vessels linked to Yemen's Iran-aligned Houthi movement, which the U.S. designated this month as a Foreign Terrorist Organization, and the U.S.-designated Iranian Ministry of Defense of Armed Forces Logistics.
Tehran says its nuclear energy program is for peaceful purposes, while Western powers say its enrichment of uranium to levels approaching weapons-grade has no logical civilian applications.
Treasury also imposed sanctions on 12 entities, and identified eight vessels as blocked property it said were responsible for shipping millions of barrels of Iranian oil to China. These vessels are part of Iran’s “shadow fleet” of tankers that supply the private refineries.
It also placed Wang Xueqing, who it said is linked to the refinery, on the specially designated nationals, or SDN, list. Americans are prohibited from doing business with people placed on that list, and their U.S. assets are blocked.
The vessels Treasury blocked included Panama-flagged Aurora Riley and the Catalina, and the Barbados-flagged Brava Lake.
The State Department said it was imposing sanctions on an oil terminal in China called Huaying Huizhou Daya Bay Petrochemical Terminal Storage for buying and storing Iranian crude oil from a sanctioned vessel.
(Reporting by Timothy Gardner. Additional reporting by Ismail Shakil, Daphne Psaledakis, Katharine Jackson and Ryan Jones in Toronto. Editing by David Gregorio, Andrea Ricci and Mark Potter)
