China orders companies to defy U.S. sanctions on Iranian oil refiners, marking unprecedented shift in compliance stance

Beijing directed companies not to comply with U.S. sanctions on private refiners linked to the Iranian oil trade, including Hengli Petrochemical (Dalian) Refinery Co., which was sanctioned last month. The announcement came before a planned meeting between President Donald Trump and Xi Jinping later this month.

China is deploying a blocking measure introduced in 2021 that protects firms from foreign laws deemed unjustified. Under the order, companies can apply for exemption if compliance would cause exceptional hardship, and transactions in yuan can make dealings less visible to U.S. authorities.

Lenders working with affected refiners are scrambling to understand the decision and seek clarity from banking regulators. Hengli Petrochemical's Shanghai-listed parent said in April it envisaged securing total banking credit of 235 billion yuan ($34.4 billion) for itself and all units this year.