Hengli Petrochemical (Dalian) Refinery Co. Ltd is a Chinese Independent refinery and petrochemical company based in Dalian, Liaoning Province. It operates within the Hengli Petrochemical group, whose parent is listed in Shenzhen. Its refinery capacity and downstream petrochemical role make it a material participant in China’s oil-processing industry.

Hengli Petrochemical illustrates how competing sanctions systems apply to one company. US measures target its alleged Iranian crude purchases, while China’s Blocking Rules seek to prevent Chinese firms from complying with specified foreign sanctions.

That position matters beyond one refinery. Hengli’s trading, banking and ownership arrangements show how a large Chinese industrial company can face foreign payment restrictions alongside domestic requirements to resist them. The resulting pressure falls not only on Hengli, but also on lenders, trading partners and clearing banks connected to its business.

Key Issues

Sanctions collision

Hengli faces a sanctions collision

On 24 April, the US Treasury designated Hengli and issued General License V, allowing a 30-day wind-down of Iran-linked transactions. The licence expired on 24 May without an OFAC ruling on whether the refinery's Singapore restructuring altered its sanctions exposure.

China had put Hengli under its Blocking Rules on 2 May, barring compliance with the US designation. On 25 May, the NFRA told four major state banks to stop new lending to sanctioned refiners including Hengli, while leaving existing credit lines open. For Hengli, the conflict is operational: it must preserve trade and finance while its counterparties weigh incompatible US and Chinese legal risks.

Common Questions

What is Hengli Petrochemical and why was it sanctioned?

Hengli Petrochemical (Dalian) Refinery Co. Ltd is China's second-largest Independent teapot refinery, processing roughly 400,000 Barrels Per Day. OFAC designated it on 24 April 2026 under sb0472 for purchasing Iranian crude from Sepehr Energy Jahan Nama Pars, generating hundreds of millions of dollars for Iran's Armed Forces General Staff.Source: OFAC press release sb0472, 24 April 2026

Has the US sanctioned Chinese oil refineries before?

The designation of Hengli on 24 April 2026 was the first major Chinese industrial facility sanctioned in the 2026 Iran conflict. It represents a significant escalation in Washington's willingness to target Chinese commercial entities directly, raising the cost to Beijing of continued Iranian crude purchases.Source: OFAC press release sb0472, 24 April 2026

What does General License V mean for Hengli's customers?

OFAC issued General License V simultaneously with the Hengli designation, authorising a wind-down period for existing transactions with no published deadline. This means Hengli's ~400,000 bpd of Iranian crude demand does not immediately fall off, delaying the supply impact on Iranian crude flows by an indeterminate period.Source: OFAC General License V, 24 April 2026

Who supplies Hengli with Iranian crude oil?

Sepehr Energy Jahan Nama Pars, the oil sales Arm of Iran's Armed Forces General Staff, supplied Iranian crude to Hengli. OFAC cited revenues of hundreds of millions of dollars paid to Sepehr Energy as the basis for the 24 April 2026 designation.Source: OFAC press release sb0472, 24 April 2026

Is Hengli Petrochemical connected to Iran's nuclear programme?

Treasury Secretary Scott Bessent attached explicit nuclear-programme language to the Hengli designation for the first time in any 2026 shadow-fleet action, framing the crude revenue paid to Iran's Armed Forces as financing nuclear-programme activity.Source: OFAC press release sb0472, 24 April 2026

What is Hengli Petrochemical and why was it sanctioned by the US?

Hengli Petrochemical (Dalian) is China's second-largest Independent teapot refinery, processing roughly 400,000 Barrels Per Day. OFAC designated it on 24 April 2026 for purchasing Iranian crude from Sepehr Energy Jahan Nama Pars, the oil sales Arm of Iran's Armed Forces General Staff, generating hundreds of millions of dollars for the Iranian military.Source: OFAC press release sb0472, 24 April 2026

Has the US ever sanctioned a major Chinese oil refinery before?

The 24 April 2026 designation of Hengli was the first major direct OFAC action against a Chinese industrial facility in the 2026 Iran conflict. It represents a significant escalation in Washington's willingness to target Chinese commercial entities, raising the cost to Beijing of continued Iranian crude purchases.Source: OFAC press release sb0472, 24 April 2026

What does General License V mean for Hengli's crude purchases?

OFAC issued General License V alongside the Hengli designation, authorising a wind-down period for existing transactions with no published deadline. Hengli's 400,000 bpd of Iranian crude demand does not immediately fall off, which delays the supply impact on Iranian crude flows by an indeterminate period.Source: OFAC General License V, 24 April 2026

Why did Hengli transfer its Singapore arm to a Chinese state entity?

Hengli transferred 95% of its Singapore trading subsidiary's equity to a Chinese state-affiliated entity in late April 2026, days after the OFAC designation. The move is widely read as insulating the trading Arm from US dollar-clearing exposure and placing it outside OFAC's practical enforcement reach.Source: Lowdown reporting, April 2026

Can Hengli comply with China's Blocking Rules and US sanctions simultaneously?

No. China's MOFCOM activated the 2021 Blocking Rules on 2 May 2026, explicitly prohibiting Hengli from complying with OFAC's designation. Hengli is now legally barred from compliance under Chinese law while simultaneously designated under US law, making it the first major Chinese industrial entity in two directly contradictory legal regimes at once.Source: MOFCOM order, 2 May 2026

Why was Hengli Petrochemical sanctioned by the US?

OFAC designated Hengli on 24 April 2026 for purchasing Iranian crude from Sepehr Energy Jahan Nama Pars, the oil sales Arm of Iran's Armed Forces General Staff.Source: OFAC press release sb0472

What happens to Hengli after the 24 May General License V deadline?

After 24 May, any continued transactions with Hengli require a fresh OFAC licence. Whether Hengli quietly winds down Iranian crude purchases under GL-V cover is the key indicator of actual Chinese enforcement.Source: OFAC

What is the contradiction between MOFCOM and China's banking regulator on Hengli?

MOFCOM's Blocking Rules order forbids Hengli from complying with OFAC, while the NFRA privately told state banks to halt new yuan loans to Hengli — directly contradictory signals from two Chinese government bodies.Source: Bloomberg

How does China protect Hengli from US sanctions?

MOFCOM issued Announcement No. 21 under the 2021 Blocking Rules, prohibiting Hengli from complying with OFAC's designation. Hengli also transferred its Singapore trading Arm to a Chinese state-affiliated entity to remove it from dollar-clearing exposure.

Source Material

Hengli Group — Wikipedia OFAC Press Release sb0472 — 24 April 2026