Over one weekend in late April, the US put a Chinese refinery on its sanctions blacklist. Hengli Petrochemical, a 400 kbd plant, is the largest Chinese refinery by capacity to land there so far. The reason given was its purchases of Iranian oil.
Hengli denied trading with Iran after the sanctions hit and its share price dropped sharply. Some market participants see it differently. They suggest the Dalian-based independent refiner is currently running entirely on Iranian and Russian feedstocks.
Pressure on two capitals
The listing came alongside tighter US enforcement against Iranian oil shipments and trade, and a US blockade on Iranian shipping, according to the commodity analysts at Kpler. Washington’s aim, they wrote, is to bring an end to the two-month-old Middle East war and to gain the upper hand in upcoming trade talks with China. It is squeezing Tehran and Beijing at once.
China has so far largely stayed out of the US-Israeli war with Iran, at least on the surface. Many countries, the US among them, hope it will step up as a mediator. It has done that before: in 2023 Beijing brokered the restoration of diplomatic ties between Saudi Arabia and Iran.
Kpler’s reading is that the blockade and the Hengli sanctions appear to be nudging China toward a more active role. They also hand Beijing extra leverage before the Trump-Xi meeting scheduled for the following month.
China has reasons to move. A standstill in Hormuz traffic, plus the growing risk of a global downturn driven by energy shortages and high inflation, is in no way in its interest. The open question, Kpler said, is when and how far Beijing chooses to get involved. The firm added that far more may already be happening behind the scenes.
