China’s blocking of US sanctions signals new economic-legal cold war
By Hamed Vafaei
China affairs expert
China’s recent decision to ban compliance with US sanctions against five Chinese companies linked to Iranian oil—marking the first use of its “blocking statute”—stands as a significant and symbolic legal-political step. The Chinese Ministry of Commerce explicitly stated that no individual or entity should recognize, implement, or comply with US sanctions targeting firms such as Hengli Petrochemical (Dalian) Refinery and four Shandong-based “teapot” refineries.
From a legal and economic standpoint, this move is, first and foremost, an effort to safeguard Beijing’s economic sovereignty against unilateral US pressure. By issuing this extraterritorial ruling and rejecting American sanctions, China has effectively drawn on the same model previously employed by the European Union in response to US secondary sanctions on Iran following Donald Trump’s withdrawal from the 2015 nuclear deal (JCPOA) in 2018. The measure aims to shield Chinese companies from US penalties or secondary pressure, while also sending a clear signal that Beijing is unwilling to sacrifice its vital interests—particularly in energy security—under pressure from Washington.
Economically, the move is equally significant given that China purchases more than 80% to 90% of Iran’s exported oil, particularly through smaller, more flexible “teapot” refineries. Under current conditions—especially with the Strait of Hormuz effectively closed and global oil flows disrupted—these purchases have become even more critical for China. Iranian oil, offered at favorable prices, effectively helps Beijing contain its energy costs while preserving profit margins for domestic refineries. As such, this step can be seen as a key effort to protect China’s energy supply chain.
From a geopolitical perspective, particularly in light of a likely upcoming meeting between heads of the US and China, Donald Trump and Xi Jinping, Beijing’s stance appears to be a calculated move carrying a direct message for Washington. Through this action, China is signaling to the US—its principal strategic rival—that it will not back down on issues tied to its national interests, especially energy security and supply chains. In such areas, Beijing is unlikely to be pressured into retreat.
At the same time, amid the complex dynamics unfolding in West Asia, including the closure of the Strait of Hormuz, it should be noted that disruptions triggered by US-Iran tensions have delivered a major shock to global energy markets, driving up oil prices. China, as the world’s largest oil importer, has not been immune to these pressures. However, it also has an opportunity to navigate its dependence on alternative energy routes, including supplies from Russia or the Persian Gulf, in a more calibrated manner.
In this context, China’s legal backing for continued purchases of Iranian oil sends a signal across West Asia that Beijing still recognizes Iran as a key energy supplier—even in times of crisis—and is committed to maintaining that relationship. At the same time, the move helps Tehran preserve its limited foreign currency revenues and sustain its resistance to unlawful Western sanctions.
A key point for policymakers in the Islamic Republic lies in distinguishing between an “ideological ally” and a “calculative strategic partner.” Based on current realities in the international system, China appears to be seeking a careful balance—providing operational support to Iran without incurring direct military or security costs.
On another level, this move also reinforces China’s narrative of “multilateralism-based international law” while undermining the legitimacy of unilateral US sanctions. From this perspective, Beijing’s action should be seen as part of a broader effort to build a parallel financial architecture and sustain policies such as de-dollarization and the promotion of the petro-yuan. Given the closure of the Strait of Hormuz and China’s track record in “transactional diplomacy,” Tehran would be well advised to present its proposals for Beijing’s role in West Asia and the Persian Gulf before the anticipated Trump–Xi meeting.
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