China adapts to Iran oil shock as US shipping sanctions intensify

Seeking an exit from its war with Iran, Washington is stepping up economic pressure on Tehran and its trading partners. How far will Treasury Secretary Scott Bessent go to restrict China’s access to Iranian crude?

We examined the “teapots,” refineries known for processing Iranian crude that don’t use dollar-based international banking – i.e., they are beyond the reach of US sanctions.

We can use high-frequency data from Lloyd’s List to consider the effects on ports associated with the teapots. They saw a sustained run-up in tanker traffic before the war. While this share fell in the wake of the OFAC scrutiny, it has recovered more recently, and their shipments held up better than other oil ports in mid-August.

To be sure, tanker calls measure vessel activity rather than volumes. Indeed, “declared” crude imports have shrunk by almost a third; China has adapted to a world where oil from traditional GCC trading partners is constrained, sourcing relatively more from Brazil and Russia. China’s flexible reaction – lower imports, reshuffled suppliers, reduced refinery runs and inventory use – points to the limits of Bessent’s sanctions strategy.