Understanding China’s Anti-Sanctions Law

China has ordered citizens and companies to defy US sanctions on five Chinese refineries handling Iranian oil, marking a significant move against US “extra-territorial” measures.

Key Points

• China has instructed its citizens and companies not to comply with US sanctions on five Chinese refineries linked to Iranian oil. The Ministry of Commerce issued a “prohibition order” against US measures, marking China’s first use of its law against "extra-territorial" sanctions. This move emphasizes China’s opposition to US jurisdiction over foreign businesses.

• The anti-sanctions law requires Chinese entities affected by foreign sanctions to report to the Ministry of Commerce, potentially leading to penalties if they fail to comply. Businesses harmed by others’ adherence to foreign sanctions can seek legal redress. Instituted in 2021, this law formalizes China’s resistance against US sanctions, which it views as a systemic challenge.

• Companies caught between US and China tensions face challenges, choosing compliance based on market exposure. US sanctions often have more immediate impacts, but for entities focused on China, adhering to Beijing’s laws might be more feasible. Although Chinese media praises the move, the effectiveness of this model for other nations, like Russia, is doubted.

China has enacted a prohibition order instructing its citizens and companies to disregard US sanctions against five Chinese refineries accused of handling Iranian oil. This marks the first time China has employed its anti-sanctions law, introduced in 2021 to counteract “extra-territorial” punitive measures, which it views as unjustified extensions of US legal jurisdiction. The Chinese government has consistently opposed unilateral sanctions lacking UN authorization, asserting that such measures violate international law and infringe upon China’s national sovereignty.

Under China’s anti-sanctions law, citizens and businesses affected by foreign legislation must report to the Ministry of Commerce, which can prohibit compliance with such sanctions. This formalizes China’s resistance to US sanctions, signaling a strategic shift from informal protests to legal countermeasures. The law allows businesses to seek compensation if they suffer losses due to foreign sanctions enforcement, emphasizing a structural legal response to perceived long-term challenges.

The latest move indicates China’s assertive stance against US sanctions, with Beijing expanding its range of retaliatory tools. Companies operating between the US and China face complex decisions, balancing compliance with US sanctions and potential repercussions from Chinese countermeasures. The choice often depends on their exposure to both markets; those with significant US ties may lean towards US compliance due to immediate consequences, whereas China-focused companies might prioritize alignment with Beijing’s regulations.

Chinese state media suggests this legal framework could inspire other nations to resist US pressure, with potential implications for global geopolitical dynamics. However, the practical impact on countries already isolated from US financial systems, such as Russia and Iran, might be limited, as these entities already navigate minimal engagement with US sanctions due to pre-existing financial exclusions.

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