China Issues First Blocking Order Against U.S. Sanctions on Five Oil Refiners Linked to Iranian Oil Trade

In a significant escalation of economic tensions with the United States, China’s Ministry of Commerce on May 2 issued its first-ever blocking order under a 2021 regulation, prohibiting Chinese entities from recognizing, enforcing, or complying with U.S. sanctions imposed on five domestic petrochemical companies over alleged dealings with Iranian oil.

The move comes days after the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned Hengli Petrochemical (Dalian) Refinery Co., Ltd.— China’s second-largest independent “teapot” refinery — on April 24, along with other firms. The U.S. accused these companies of purchasing billions of dollars’ worth of Iranian petroleum, often via sanctioned “shadow fleet” vessels, thereby supporting Iran’s economy and military.

Under the blocking order, issued pursuant to China’s Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures (known as the Blocking Rules), any individual or entity in China is barred from acknowledging or acting on the U.S. sanctions, which include asset freezes and transaction bans.

A commentary published in People’s Daily on May 3 described the action as “a pivotal step” in deploying China’s foreign-related legal tools from institutional readiness to practical application. It framed the order as a precise legal counter to U.S. “long-arm jurisdiction,” aimed at safeguarding Chinese enterprises’ legitimate rights while upholding international trade norms and the principle of sovereign equality.

Chinese officials emphasized that the United States’ unilateral sanctions, imposed without United Nations authorization, violate international law and disrupt global energy supply chains. Beijing stated that the blocking measure is a necessary step to protect national sovereignty, security, and development interests, as well as the lawful rights of Chinese citizens and organizations.

This marks the first time China has activated the 2021 blocking rules since their introduction. The regulations were designed to shield Chinese entities from what Beijing views as unjustified extraterritorial application of foreign laws, similar to measures adopted by the European Union in the 1990s to counter U.S. sanctions on Cuba and Iran.

China has reiterated its preference for resolving differences through equal-footed dialogue and its commitment to mutually beneficial Sino-U.S. economic ties. However, it stressed that it will not hesitate to use its legal toolkit — including the Anti-Foreign Sanctions Law and other statutes — to counter perceived hegemonic practices.

The development occurs ahead of anticipated high-level talks between Chinese and U.S. leaders, highlighting ongoing friction in bilateral relations amid broader efforts by Washington to curb Iran’s oil revenues.

Analysts note that while the order provides legal cover for Chinese firms domestically, it could create compliance dilemmas for international banks and companies caught between the two jurisdictions. Beijing has indicated it will continue monitoring extraterritorial measures and respond as necessary.