By Simone McCarthy, Teele Rebane, Isaac Yee, Yong Xiong, CNN
Cangzhou, China (CNN) — A few hundred miles from where Chinese leader Xi Jinping will roll out the red carpet for President Donald Trump this week, a shadowy ecosystem has long been at work pumping billions of dollars into Iran’s economy – now helping keep Tehran afloat in defiance of the US.
These are the ports, pipelines, and oil refineries of Shandong province and its borderlands, where the hulking architecture of oil storage tanks and spindly profiles of smokestacks jut up from barren, coastal flatlands.
Here, so-called “teapot refineries” – small, independent oil companies that operate with the permission of Beijing – quietly process US-sanctioned Iranian crude into gas, diesel and petrochemicals for the world’s second largest economy.
Now, as Washington looks to cut Tehran’s financial lifelines and force it to capitulate to end a months-long war, these activities are being yanked out of the margins and onto the negotiating table between Trump and Xi.
Tensions around this trade are deepening – playing out against a backdrop in which Beijing seeks stability in its relationship with the US, but also holds close economic and diplomatic ties with Iran.
On the eve of Trump’s departure for China, the US Treasury Department blacklisted 12 people and entities for their roles enabling the “sale and shipment of Iranian oil” to China.
Beijing earlier this month ordered firms to ignore US sanctions on refineries soon after Washington added another facility to its list. An ocean away in the Arabian Sea, US naval forces are chasing down so-called “shadow tankers” that ferry this crude from Iran – often to later be imported by operators in eastern China.
Treasury Secretary Scott Bessent recently accused China of helping to fund Iran’s terror networks with its energy purchases.
Earlier this week, along a desolate stretch of road lined with oil refineries just north of the border between Shandong and Hebei provinces, an awareness of that spotlight seemed palpable.
A visit to a US-sanctioned refinery
Security was tight around facilities run by the Hebei Xinhai Chemical Group – a refinery sanctioned by the US a year ago.
Masked guards stood outside entry gates to the processing complex, which sprawled across several blocks in an industrial port area.
Several vehicles, including one with the company logo, started tailing a CNN crew that drove along a public road in front of the facility, attempting to block the team’s ability to film, even out the window. Other facilities that the team passed in the area did not appear to have similar levels of security.
This company makes gas, diesel and chemicals like bitumen, used in making blacktop pavement.
Washington last May accused Hebei Xinhai of purchasing oil “associated with the Iranian military.” It also said the company had imported crude worth hundreds of millions of dollars carried on shadow fleet tankers, including those sanctioned for transporting Iranian goods. Hebei Xinhai declined an interview request from CNN.
The company is part of a growing US blacklist.
Four other Chinese oil refineries have been sanctioned since last year – most within a few hours’ drive of one another in this coastal, energy hub.
The industry in Shandong province cropped up decades ago to feed off the Shengli oilfields in the Yellow River delta, but now they import heavily from overseas – processing roughly a fifth of the oil China consumes.
And the source of those imports? Often sanctioned crude, analysts say.
“These are small p