China Orders Block on U.S. Sanctions for Iranian Oil Trade

China has issued a new order prohibiting compliance with certain U.S. sanctions related to trade with Iran. The directive from the Ministry of Commerce, known as Announcement No. 21, was released on May 2. It applies to U.S. The order states that Chinese parties "shall not recognize," "shall not enforce," and "shall not comply with" these U.S. measures.

This response follows the U.S. Treasury's designation on April 24 of five Chinese refiners for purchasing Iranian crude oil. The named entities include Hengli Petrochemical in Dalian and four smaller producers in Shandong and Hebei provinces.

First Activation of Counter-Sanctions Law Announcement No.

21 represents the initial invocation of China's Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation. These rules were promulgated on January 9, 2021, but remained unused until now. The order declares the U.S. sanctions unenforceable within China.

Under the new directive, affected Chinese refiners can pursue legal action in Chinese courts. If a bank, trader, insurer, or shipper halts business with them to adhere to U.S. sanctions, the refiners may sue for damages. This mechanism provides a private right of action for the first time under the 2021 rules.

The announcement precedes President Trump's scheduled meeting with Chairman Xi Jinping in Beijing on May 14-15. It addresses sanctions imposed during a prior U.S. administration but enforced recently. China's action targets penalties on any individual or firm trading with Iran.

The U.S. designations in April focused on the five refiners' purchases of Iranian crude. Beijing's response asserts that these measures will not be recognized on Chinese soil.

The order could affect international banks and companies dealing with the designated refiners. It establishes a precedent for using the 2021 rules against foreign sanctions. While the immediate impact involves the five refiners, the mechanism may extend to other cases.

China leads the BRICS group, which includes several major economies. The directive challenges the assumption that major countries would not reciprocate against U.S. sanctions. Historical data indicates sanctions often lead to counter-responses from targeted nations.

The announcement was issued through the Ministry of Commerce, directing all Chinese citizens, companies, and organizations. It builds on the 2021 rules, which were designed to counter extra-territorial foreign laws. This step activates a long-dormant legal tool.

U.S. Executive Order 13846 was signed on August 6, 2018, reimposing sanctions on Iran after the U.S. withdrawal from a nuclear agreement. Executive Order 13902, from January 10, 2020, expanded penalties on sectors including construction and manufacturing tied to Iran.

The recent designations enforced these orders against the Chinese firms.

The summit between President Trump and Chairman Xi Jinping is set for mid-May in Beijing. Discussions may cover trade, sanctions, and bilateral issues. The timing of Announcement No. 21 positions it as a precursor to these talks. The five designated refiners vary in size, with Hengli Petrochemical being a larger entity.

The four others operate in Shandong and Hebei. The U.S. Treasury's action on April 24 marked the latest enforcement of the sanctions regime.