China Invokes New Blocking Statute to Shield Refineries From U.S. Sanctions

Context The United States has been targeting Chinese oil‑processing facilities it says facilitate Iran’s petroleum exports. Since 2025, five refineries have been placed on the U.S. Specially Designated Nationals (SDN) list, a roster that freezes assets under U.S. jurisdiction and bans U.S. persons from dealing with listed entities. The latest U.S. action includes Hengli Petrochemical’s Dalian refinery, added to the list on April 24, 2025.

Key Facts - China’s Ministry of Commerce issued an injunction on Saturday that bars Chinese companies from recognizing or implementing the U.S. measures against the five refineries. - The order cites the new blocking statute, enacted on April 13, 2024, which empowers Beijing to shield domestic firms from “extraterritorial” sanctions that it deems harmful to national interests. - The five refineries named are Hengli Petrochemical (Dalian), Shandong Shouguang Luqing, Shandong Jincheng, Hebei Xinhai, and Shandong Shengxing. - Hengli Petrochemical denies any trade with Iran, holds no assets in the United States, and settles crude purchases in Chinese yuan rather than dollars. - The U.S. sanctions carry penalties such as asset freezes and prohibitions on transactions with U.S. persons, but the Chinese injunction warns firms that compliance could trigger domestic penalties for violating the blocking law.

What It Means The move signals Beijing’s willingness to confront U.S. extraterritorial enforcement directly. By invoking the blocking statute, China aims to prevent “over‑compliance,” where firms voluntarily halt business to avoid secondary sanctions, thereby limiting economic fallout for its petrochemical sector. The injunction also raises the risk of a legal clash: U.S. authorities could view non‑compliance as a breach of secondary sanctions, while Chinese regulators may penalize firms that ignore the order.

For U.S. companies, the directive creates a compliance dilemma. Continuing business with the listed refineries could expose them to U.S. penalties, yet disengaging may violate Chinese law. The situation tests the limits of each country’s jurisdictional reach and could set precedents for future disputes over sanctions on third‑party entities.

Looking ahead, watch for any retaliatory measures from Washington, such as expanded secondary sanctions, and monitor how Chinese firms adjust their trade practices amid the competing legal demands.