China has ordered companies to disregard U.S. sanctions targeting Iranian oil in what is being described as an “unprecedented” move. A directive issued through China’s Commerce Ministry invokes a “blocking statute” that prohibits firms from complying with foreign sanctions deemed illegitimate.
Max Meizlish, a research fellow at the Foundation for Defense of Democracies, stated that the move represents “a major escalation in terms of China’s response to U.S. economic statecraft” and is “a measure of defiance by Beijing.”
The escalation comes as the Trump administration intensifies its sanctions campaign, targeting Chinese refiners and warning financial institutions they could face penalties for facilitating oil transactions between Iran and China. Treasury Secretary Scott Bessent has accused Beijing of effectively financing Iran’s military activity through its oil purchases, arguing that Chinese demand sustains Tehran’s economy.
“China, let’s see them step up with some diplomacy and get the Iranians to open the strait,” Bessent said in a recent interview. “Iran is the largest state sponsor of terrorism … China has been buying 90 percent of their energy, so they are funding the largest state sponsor of terrorism.”
China remains the primary destination for Iranian crude, with much of the country’s sanctioned oil exports flowing to Chinese refiners despite mounting U.S. pressure. The directive comes before a highly-anticipated meeting between President Trump and Xi Jinping later this month.
Within China, state media outlets and academics who advise the government framed the retaliation as a forceful but calibrated response against U.S. overreach. A commentary on the People’s Daily app, the Communist Party mouthpiece, labeled it “a pivotal step” in using the legal instrument to restrain what it called the “long-arm jurisdiction” of the United States.
Beijing’s move tests the U.S. sanctions system at a time when Washington vacillates on curbs against Russia, Venezuela and Iran. With Trump’s war against Iran straining global alliances, China has seized the opportunity to defend a major piece of its economic system while expanding its arsenal of economic weapons.
Xi’s government has progressively increased the use of alternative tools, from rare earths to technology. Beijing recently blocked Meta Platforms Inc.’s $2 billion purchase of AI startup Manus, moving to scuttle the deal even after it had been sealed.
“ heating: They want to have as many levers as possible,” Ja Ian Chong, an associate professor of political science at the National University of Singapore, stated. “This should be seen in the context of increasing controls. It is not a one off.”
China is deploying a blocking measure introduced in 2021 designed to protect its firms from foreign laws it deems unjustified. The refiners—including Hengli and several other privately-owned processors—had been facing asset freezes and transaction bans under U.S. sanctions.
