China Directs Firms to Defy US Sanctions on Iranian Oil Refiners
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China Directs Firms to Defy US Sanctions on Iranian Oil Refiners
- China activated its 2021 blocking statute to five domestic refiners from US sanctions imposing asset freezes and transaction bans Iranian oil purchases.
- Hengli Petrochemical (D) Refinery Co., by the US last month, is among the targeted privately-owned processors protected by Beijing's order.
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China has instructed its companies to disregard recent US sanctions targeting five independent refiners accused of violating restrictions on Iranian oil imports, marking a direct escalation in the ongoing trade and energy dispute between the world’s two largest economies.
The move invokes China’s anti-foreign sanctions law, enacted in 2021, which allows Beijing to nullify the effects of what it considers unjust extraterritorial measures. This “blocking statute” prohibits Chinese firms from complying with such foreign rules, under threat of domestic penalties. The refiners in question, including major players like Hengli Petrochemical (Dalian) Refinery Co., were hit by US Treasury Department actions in April 2025. These sanctions stem from the Trump-era “maximum pressure” campaign renewed in early 2025, aimed at curbing Iran’s oil exports amid nuclear tensions and regional conflicts.
US measures specifically target “teapot” refiners—smaller, private processors in Shandong province that have historically bought discounted Iranian crude to refine into fuels and petrochemicals. Since sanctions were reimposed, these firms have faced frozen overseas assets and bans on dollar transactions, disrupting global supply chains. Beijing’s response underscores its strategy to secure energy imports, as China remains the top buyer of Iranian oil despite sanctions, often via ship-to-ship transfers and obscure routing to evade detection.
This development follows a pattern of countermeasures: China has previously used the blocking law against US restrictions on Huawei and semiconductor firms. Analysts note it could complicate US enforcement, potentially leading to secondary sanctions on Chinese banks or insurers involved. As of May 2025, global oil markets show little immediate disruption, with Brent crude stable around $80 per barrel, but heightened US-China friction risks broader fallout in energy and tech sectors.
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