China calls US sanctions illegal

China just turned a sanctions dispute into a jurisdiction fight. On May 2, Beijing told Chinese companies they must not recognize, enforce, or comply with U.S. sanctions on five Chinese refiners accused by Washington of buying Iranian oil. That is the news. The bigger point is that China did not just complain — it used a legal tool designed to block the reach of foreign law inside China. ### What exactly did China do? China’s Ministry of Commerce issued what it calls a blocking ban. The order says U.S. measures against five Chinese companies cannot be recognized, implemented, or obeyed in China. The ministry also said the U.S. sanctions violate international law and the basic norms of international relations because they restrict Chinese firms’ trade with third countries. ### Which companies are in the middle? The five firms are Hengli Petrochemical (Dalian) Refinery Co., Shandong Shouguang Luqing Petrochemical Co., Shandong Jincheng Petrochemical Group Co., Hebei Xinhai Chemical Group Co., and Shandong Shengxing Chemical Co. Washington had targeted them over alleged involvement in Iranian petroleum transactions, with asset-freeze and transaction-ban consequences under the U.S. sanctions system. ### Why were the U.S. sanctions there in the first place? The U.S. Treasury has been tightening pressure on China-based “teapot” refiners — smaller independent processors, many in Shandong — because they are a major outlet for discounted Iranian crude. Treasury said last week that China buys about 90% of Iran’s oil exports and that teapot refiners work with shipping firms and vessels tied to Iran’s oil trade. ### Why is this different from the usual diplomatic protest? Because Beijing moved from rhetoric to instruction. China has had blocking rules since 2021, but this appears to be their first high-profile use against specific U.S. sanctions on Chinese firms. Basically, China is saying: U.S. law may bind U.S. persons, but it does not get to dictate what companies inside China do with third-country trade. ### So what is a company supposed to do now? That is the catch. A multinational with exposure to both systems can get squeezed from both sides. Follow U.S. sanctions too closely and it could violate China’s blocking order. Ignore U.S. sanctions and it could lose access to dollars, U.S. banks, insurers, or counterparties. For legal setup and the kinds of penalties attached on each side. ### Why does Iran matter so much here? Iranian crude is cheap, and independent Chinese refiners have been willing buyers. That gives Tehran a revenue lifeline and gives Beijing-linked buyers a discounted feedstock stream. Washington wants to choke that off. Beijing wants to preserve room for trade that it says is normal and lawful. So the fight is not only about five refiners — it is about who gets to police cross-border energy commerce. ### Does this change the broader U.S.-China picture? It adds another layer. Tariffs and export controls were already pushing companies to de-risk supply chains. Now sanctions compliance joins the list. If Beijing keeps using blocking tools more often, firms will need to map not just where goods move, but which legal system claims authority over each payment, cargo, and contract. ### Bottom line? China is no longer just calling some U.S. sanctions unfair. It is telling companies on its soil not to obey them. That makes the real story less about one refinery list and more about a growing collision between two legal systems — with global businesses stuck in the middle.