China Defies US Sanctions on Iranian Oil, Orders Refineries to Ignore Restrictions

China’s Ministry of Commerce has issued new directives ordering domestic companies not to comply with US sanctions on Iranian oil, a direct challenge to the Trump administration’s efforts to cut off Tehran’s revenue streams. The instructions, released Sunday, invoke China’s 2021 anti-sanctions law, which prohibits firms from submitting to foreign penalties Beijing deems illegitimate.

The order targets major Chinese refineries, particularly independent facilities known as “teapot refineries,” which Washington has accused of purchasing Iranian crude, according to a Fox News report. The move marks a shift from years of covert maneuvering to open, state-backed resistance against US attempts to choke one of Iran’s primary income sources.

‘Unprecedented Escalation’

Max Mayzlish, senior research analyst at the Foundation for Defense of Democracies, described the step as “unprecedented,” calling it “a major escalation in China’s response to US economic diplomacy and a clear measure of the challenge Beijing poses.”

The escalation comes as the Trump administration intensifies its punitive campaign against Tehran, targeting Chinese refineries and warning financial institutions of potential sanctions if they facilitate Iran-China oil deals. Treasury Secretary Scott Bessent has accused Beijing of funding Iranian military activities through its oil purchases, arguing that Chinese demand keeps Iran’s economy alive.

“Let’s see China move diplomatically to persuade the Iranians to open the strait… Iran is the world’s largest state sponsor of terrorism, and China buys 90% of its capacity, so it is funding the largest state sponsor of terrorism,” Bessent told Fox News.

China remains the primary destination for sanctioned Iranian oil, with most of Tehran’s banned exports flowing to its refineries despite mounting US pressure. Mayzlish said Chinese companies now face a difficult choice: comply with orders from the Chinese Communist Party or with US sanctions, each carrying consequences. “This is a clear attempt by Beijing to put the ball back in the US court, to see if it will actually act,” he added.

The issue is expected to dominate the upcoming summit between President Trump and Chinese President Xi Jinping. Meanwhile, diplomatic activity is accelerating, with Iranian Foreign Minister Abbas Araghchi arriving in Beijing on Wednesday for talks with his Chinese counterpart Wang Yi, highlighting China’s growing role as both the largest buyer of Iranian oil and a key diplomatic intermediary.

Sanctions Evasion and Legal Risks

Despite the US naval blockade and increasing sanctions, shipments continue through complex and opaque maritime networks. Data from maritime intelligence firm Windward revealed a sharp rise in vessels operating without tracking signals, with a recent report showing 146 out of 167 ships in the Strait of Hormuz were “invisible” after disabling GPS devices.

Beijing’s official stance creates new risks for global companies. China’s anti-sanctions law allows Chinese firms to sue banks, insurers, and shippers that cut ties to comply with US sanctions. Analysts warn that multinational corporations may find themselves caught between access to China’s vast market and the risk of being cut off from the US financial system.

The confrontation presents a major strategic challenge for Washington: while sanctions remain a central tool of US foreign policy, enforcing them against major economies like China—especially when transactions occur outside the dollar system—becomes far more difficult.