As part of its efforts to interrupt Iranian sale of oil to the PRC, the United States has imposed sanctions on Chinese oil refineries, with possible penalties for Chinese banks and others exposed to the U.S. financial system if they fail to cooperate in implementing the sanctions. Now the People’s Republic of China has responded with threats to punish firms that cooperate (Bloomberg, May 2, 2026).
China ordered companies in the country not to comply with US sanctions on five domestic refiners linked to the Iranian oil trade, deploying a blocking measure introduced in 2021 that was aimed at protecting its firms from foreign laws it deemed unjustified.
The refiners—including Hengli Petrochemical (Dalian) Refinery Co., which was sanctioned last month, and several other privately-owned processors—had been facing asset freezes and transaction bans….
China has long been the single largest buyer of Tehran’s oil shipments, many of them arriving indirectly and through private refiners, and then turned into gasoline, diesel and other oil products. Chinese customs data do not reflect that trade, with the last official shipment recorded several years ago.
According to Eurasia Group, China’s injunction “allows the refineries to seek compensation in Chinese courts from entities that comply with US sanctions, including domestic actors—such as banks, investors, and downstream customers that have ceased dealings—as well as foreign firms with a presence in China.”
The U.S. can either follow through or, letting China thwart the refinery sanctions, focus on blocking Iranian shipments of the oil. “The refineries primarily work with Chinese banks that have not yet been directly sanctioned. If the US extends secondary sanctions to those institutions, or major state-owned entities, Beijing would likely respond with more forceful countermeasures.”
The on-and-off trade war of the last year or so has shown that the CCP is often more willing to press the U.S. to the wall than vice versa. Perhaps this time around, President Trump, Treasury Secretary Scott Bessent, and other principals on the U.S. side have anticipated the possibility of China’s response and are not being simply blindsided by it.
Bessent
I’m not encouraged by Bessent’s recent words on Fox News asking the PRC to help the U.S. open or keep open the Strait of Hormuz. “Let’s see if China—let’s see them step up with some diplomacy and get the Iranians to open the strait. Iran is the largest state sponsor of terrorism, and China has been buying 90% of their energy, so they are funding the largest state sponsor of terrorism.”
What is Bessent saying here? One possibility is that he’s trying to shame the Chinese state into no longer propping up of the Iranian state. “Hey, PRC, don’t you realize that by buying so much of Iran’s oil, you are funding the largest state sponsor of terrorism, so it’s time to step up to the plate and redeem yourself”? Of course, it’s not the Chinese government which needs to be told that it is funding Iran and Iran’s terrorist projects. It’s everybody else, including all funders of Chinese funding of Iran.
Or is Bessent saying that even noncombatant combatant China should want to cooperate with U.S. efforts to open the Strait of Hormuz since, after all, China would also benefit? With the strait open, the PRC would get a resumed flow of oil from Iran (that is, if, contrary to its interest in winning the war, the U.S. government stops interfering with Iranian oil shipments if and when the strait of is consistently open, and the U.S. also drops its sanctions on Chinese oil refineries). Chinese Communist Party, you’ve got to use your influence with Iran to keep the strait open if you want to keep getting Iranian oil and keep propping up the largest state sponsor of terrorism with your oil purchases.
Neither of the above makes sense. But it doesn’t seem coherent on any reading to say “Hey do the right thing and help out” in one breath and “you rotten funder of international terrorism” in the next. The implication of the former is false, and we can never lose sight of the latter. The CCP are thugs, not good buddies who just need a little nudge to transform themselves into morally responsible world citizens.
