China Orders Refineries to Ignore U.S. Sanctions on Iranian Oil

China's Ministry of Commerce issued an injunction on May 2 to block U.S. sanctions on five Chinese refineries accused of purchasing Iranian oil, marking a significant escalation in the trade and diplomatic tensions between the world's two largest economies. The ministry named Hengli Petrochemical (Dalian) Refinery and four "teapot" refineries: Shandong Jincheng Petrochemical Group, Hebei Xinhai Chemical Group, Shouguang Luqing Petrochemical, and Shandong Shengxing Chemical. The injunction explicitly states that the U.S. measures "shall not be recognized, implemented, or complied with," directly challenging Washington's authority to enforce such penalties on Chinese companies. The sanctions stem from China's continued purchase of discounted Iranian crude oil, which Washington has targeted as part of its broader effort to choke off revenue flowing to Tehran amid an ongoing diplomatic standoff. The U.S. Treasury imposed sanctions on Hengli Petrochemical in April for purchasing billions of dollars in Iranian oil, while the Trump administration sanctioned the other four refineries separately over the past year. The ministry declared the measures violate "international law and the basic norms of international relations," arguing they improperly restrict Chinese enterprises from conducting normal trade activities. China consistently opposes unilateral sanctions lacking United Nations authorization and a basis in international law. The sanctions have created operational hurdles for the refiners, including difficulties sourcing crude oil and requiring them to sell refined products under different names. "Teapot" refineries account for roughly a quarter of Chinese refinery capacity and have already been squeezed by tepid domestic demand and narrow or sometimes negative margins. The latest U.S. sanctions targeted another Chinese firm, Qingdao Haiye Oil Terminal, on Friday for importing "tens of millions of barrels" of Iranian crude oil. President Donald Trump is scheduled to visit China later this month for talks with President Xi Jinping, where these tensions are expected to feature prominently in discussions.