In an unprecedented act of defiance, China pushed back against Washington’s sanctions on Chinese refiners buying Iranian crude, invoking a “blocking rule” for the first time, directing companies not to comply with U.S. sanctions.
The countervailing orders would, at a high level, “place U.S. companies in the position of choosing between compliance with U.S. or Chinese regulatory regimes,” said Han Shen Lin, China managing director for The Asia Group.
In the history of US-China economic relations, China has never previously invoked a blocking rule against American sanctions. The instrument — equivalent to what the European Union used against US sanctions after Trump withdrew from the JCPOA in 2018 — effectively tells Chinese companies that the Chinese government will penalise them if they comply with American sanctions law. It creates a direct regulatory conflict in which companies must choose which jurisdiction’s penalties they can better afford.
What the Blocking Rule Covers
The blocking rule was specifically invoked against US secondary sanctions on Chinese refiners purchasing Iranian crude oil. These secondary sanctions — which the Treasury has been applying with increasing aggressiveness since Operation Economic Fury began — threaten Chinese companies with being cut off from US correspondent banking, dollar clearing systems, and access to the US financial architecture that is essential for conducting global trade.
The blocking rule says: if Chinese companies comply with those US sanctions and stop buying Iranian oil, the Chinese government will sanction them for complying with foreign law that conflicts with Chinese national interest. The companies are trapped between two regulatory regimes.
What the Summit Must Resolve
Trump’s upcoming Beijing summit — delayed by more than a month due to the war in Iran — could present a critical opportunity for the U.S. If China can help establish lasting peace, that might boost its standing in negotiations on trade issues.
The blocking rule creates the specific trade the Trump-Xi summit needs to make. Trump offers: suspend the secondary sanctions on Chinese refiners buying Iranian oil, or provide a waiver period during the 30-day MOU negotiation. Xi offers: lift the blocking rule and instruct Chinese refiners to comply with US sanctions, thereby cutting off Iran’s shadow fleet revenue and adding maximum economic pressure to Tehran to sign the MOU.
That exchange — US sanctions flexibility for Chinese Iran leverage — is the transaction that both sides need and that the summit provides the moment to execute. Whether Trump accepts a temporary sanctions waiver as the price for Chinese cooperation on Iran will determine whether the MOU gets signed in the next two weeks or the war drags into its fourth month.
