For the better part of seven years, China’s state-owned refineries treated Iranian crude like it was radioactive. Now, thanks to a 60-day sanctions waiver from the US Office of Foreign Assets Control, they’re reconsidering.

The waiver, issued around mid-June 2026, creates a narrow window for controlled purchases of Iranian oil. And while China’s scrappy independent refineries, the so-called “teapots,” have been happily buying discounted Iranian barrels this entire time, the return of state-backed giants would mark a meaningful shift in the geopolitics of oil markets.

The teapot era and its limits

When the US reimposed sanctions on Iran in 2018, the major international buyers scattered. European refiners walked away. Japanese and South Korean importers pulled back. But China’s independent refineries, smaller operations scattered across Shandong province and elsewhere, kept buying. They had less to lose from US financial system exposure and plenty of appetite for cheap oil.

China now purchases approximately 90% of Iran’s total oil exports. Iranian crude shipments to China ran at about 1.38 million barrels per day in 2025, all flowing at steep discounts to benchmark prices.

Why state refiners walked away, and what’s changed

China’s state-owned refineries had significant direct oil flows from Iran before 2019. When sanctions tightened, they made a calculated decision to prioritize access to the US financial system over cheap Iranian barrels.

The OFAC waiver changes the math, at least temporarily. Trade sources indicate that the National Iranian Oil Company is already exploring engagements with both state-owned Chinese buyers and other Asian refiners in the wake of the waiver.

According to analysts at Kpler, the energy data firm, no immediate surge in state refiner purchases is expected. The missing ingredient is pricing. State refiners operate with tighter margin discipline than teapots and won’t jump in unless the economics are compelling.

Kpler’s analysis also suggests that broader Asian interest in Iranian oil remains muted. Other countries in the region are sitting on comfortable stockpiles, which means Iran’s best hope for expanding its customer base still runs through Beijing.

What this means for energy markets

The risk for investors and traders is a whipsaw scenario. A 60-day waiver can expire, get extended, or get revoked depending on the diplomatic temperature between Washington and Tehran. Any Chinese state refiner entering this market is essentially making a bet that the regulatory environment won’t snap back before cargoes are delivered and payments are settled.