In a significant move, China has ordered its citizens and businesses to disregard United States sanctions imposed on five Chinese oil refineries accused of dealing with Iranian oil. This marks the first invocation of a 2021 law designed to counteract what China views as extraterritorial punitive measures. The Ministry of Commerce issued the order following recent sanctions announced by the US Treasury Department, which targeted Hengli Petrochemical, one of China’s major independently operated refineries.

Details of the Prohibition Order

China’s Ministry of Commerce outlined that the US sanctions against the Hengli refinery and four others will not be acknowledged or enforced within its borders. According to the ministry, the US sanctions impose improper restrictions on trade, violating international law. The order aims to protect China’s national sovereignty and economic interests, as well as the legitimate rights of its citizens.

The US Treasury previously accused Hengli Petrochemical of potentially generating substantial revenue for Iran’s military through oil purchases, describing it as one of Iran’s most valuable customers. Over 80 per cent of Iran’s oil exports are reportedly directed toward Chinese buyers, illustrating the strong economic ties between the two nations.

Under the newly invoked law, Chinese citizens and companies that encounter restrictions due to foreign laws must report their experiences to the Ministry of Commerce within 30 days. Non-compliance can result in penalties, including warnings and fines. If an individual or business is found to be subjected to unjust extraterritorial laws, the Ministry can prevent compliance with such legislation.

Implications of the Anti-Sanctions Law

The introduction of this law follows years of escalating tensions between China and the United States, particularly during the administration of former President Donald Trump. The legislation aims to provide a systematic approach for addressing grievances caused by US sanctions, moving beyond informal protests to establish a formal legal framework.

Experts note this move sends a signal that China is adopting a more assertive stance in countering US sanctions, potentially leading to a lower threshold for the use of legal and regulatory mechanisms in response. Analysts indicate that companies may face complex decisions, as compliance with US sanctions could provoke retaliatory measures from Beijing.

Naimeh Masumy, a PhD candidate specialising in Chinese anti-sanctions measures, observes that firms operating in US markets may hesitate to comply with Chinese legal frameworks given the immediate repercussions from US sanctions. Conversely, firms primarily focused on the Chinese market may find it more feasible to align with the anti-sanctions law.

Reactions and Future Considerations

Commentators predict that while the immediate effects of this order may be limited, it points to an evolving landscape where international businesses must navigate competing pressures from both the US and China. Some believe that other countries could look to China’s model as a template for establishing similar counter-sanctions laws, potentially influencing global economic dynamics.

China’s state media has portrayed this development as a noteworthy example for other nations to follow in resisting what they term “unilateral bullying” by the US. The anti-sanctions law could serve as a framework for countries, like Russia and those within the European Union, seeking to establish legal protocols for counteracting foreign sanctions.

Yet, sceptics argue that such models may offer limited value to countries already shut out of the US financial system. For nations like Iran and Russia, the lack of access to US markets means that the implementation of domestic blocking orders may not significantly alter their operational landscape.

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