China’s commerce ministry has ordered companies in the country not to comply with U.S. sanctions on five refineries accused of buying Iranian oil, Reuters reported on May 2. The move is the first known use of China’s anti-sanctions rule against Washington’s pressure on Iran’s crude trade. It raises the risk of a wider clash between the world’s two biggest economies over energy, trade and law.
The order names Hengli Petrochemical’s Dalian refinery and four smaller independent plants often called teapots: Shandong Jincheng Petrochemical Group, Hebei Xinhai Chemical Group, Shouguang Luqing Petrochemical and Shandong Shengxing Chemical. Reuters said the ministry told firms that U.S. sanctions on those companies cannot be recognized, carried out or followed in China.
The U.S. Treasury sanctioned Hengli on April 24, saying the refinery had bought billions of dollars’ worth of Iranian petroleum. Treasury also said China-based teapot refiners keep a key role in Iran’s oil income and that Hengli had received Iranian cargoes from sanctioned shadow fleet vessels since at least 2023.
China’s order rests on its 2021 Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures. The rules let Beijing issue a prohibition order when it sees foreign laws as unfairly reaching into Chinese trade. They also allow Chinese firms to ask for an exemption, and they provide for penalties if a company ignores the order.
The action comes after a sharp U.S. push against Iran’s oil network. On April 15, Washington warned that buyers of Iranian crude could face secondary sanctions and said it believed China would pause purchases as a U.S. maritime blockade took effect. Reuters later reported that the blockade and the latest sanctions had not fully stopped flows into China.
Reuters reported on April 29 that China’s independent refiners still buy Iranian oil, even as margins have weakened and some cargoes have slowed. The report said Chinese teapots buy about 90% of Iran’s oil shipments, and that they imported a record 1.8 million barrels a day in March, according to Vortexa Analytics.
The same Reuters report said some Iranian shipments had been diverted after a 30-day U.S. sanctions waiver expired on April 19. It also said tankers continued to reach China’s Shandong province, where many teapot refineries are based. The latest Chinese order may give those firms more room to keep trading while the legal fight with Washington deepens.