China Invokes Blocking Statute Over US Sanctions on Five Refiners
China’s Ministry of Commerce invoked its Blocking Statute on May 2, ordering companies to ignore U.S. OFAC sanctions on five domestic refiners and enabling lawsuits for related losses.
On May 2, China’s Ministry of Commerce invoked the Blocking Statute and instructed companies in China not to recognize or comply with U.S. Treasury Department sanctions on five domestic oil refiners. The ministry added the resolution allows affected firms to seek compensation in Chinese courts for losses tied to the measures.
The U.S. Treasury’s Office of Foreign Assets Control designated Hengli Petrochemical (Dalian) Refining & Chemical; Shandong Shouguang Luqing Petrochemical; Shandong Jincheng Petrochemical Group; Hebei Xinhai Chemical Group; and Shandong Shengxing Chemical. OFAC has accused the companies of acquiring the majority of Iran’s oil and of providing revenue to the Iranian government and its armed forces.
MOFCOM described the OFAC designations as an improper extraterritorial application of foreign law and ordered that “no entity or individual shall recognize, execute, or comply with the sanctions measures.” The ministry stated the action was intended to protect national sovereignty, security and development interests.
The Blocking Statute does not cancel U.S. sanctions outside China, but it bars Chinese entities and individuals from implementing or enforcing those foreign measures inside China. Legal experts note the statute opens a route for companies to pursue damages in domestic courts and for possible state-backed assistance to firms targeted by foreign restrictions.
Henry Gao, a professor at SMU Yong Pung How School of Law, warned that firms operating in both the U.S. and China may face conflicting legal demands and could risk losing access to one market if they comply with the other.
MOFCOM noted the government may consider countermeasures against what it described as unlawful extraterritorial sanctions but did not outline immediate retaliatory steps. The ministry emphasized protecting the legitimate rights and interests of Chinese businesses and citizens.
The action increases legal uncertainty for multinational companies, banks and trading partners that deal with the named refiners or with U.S. markets. How those parties respond will affect cross-border contracts, payment channels and supply chains.
Regulators and courts in both countries may now have roles in disputes arising from the competing obligations.
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