While global oil prices surge past $135 and African nations ration fuel, China’s network of independent refineries — known as teapot refineries — is quietly buying Iranian crude at steep discounts and processing it for domestic consumption. The arrangement cushions China from the very crisis that is devastating everyone else.
The teapot refineries, clustered in Shandong province, have been buying sanctioned Iranian oil for years. The Iran war has not disrupted this trade — it has made it more profitable. As Western-aligned nations cut Iranian imports, the discount on Iranian crude widens, and China’s independent refiners benefit.
This is the economic reality behind China’s peacemaker posture. Beijing calls for dialogue and positions itself as the responsible mediator. Meanwhile, its private sector is profiting from the conflict it claims to want to end.
The arrangement is not illegal under Chinese law. It may violate US secondary sanctions, but enforcement against Chinese companies has been minimal — particularly during a war that requires Beijing’s diplomatic cooperation on other fronts.
For countries paying $135 a barrel because the Strait of Hormuz is disrupted, the spectacle of Chinese refineries buying the same oil at $60-70 a barrel raises a question about who the global energy system actually serves.
The answer, as with most questions about the global economy, depends on how much leverage you have. China has leverage. Kenya does not. The price of oil is the same for both. The price they pay is not.
