China Invokes Anti-Sanctions Law for First Time, Challenging U.S. Iran Policy

A landmark move comes ahead of the Trump-Xi summit, as Beijing signals a new legal front in the ongoing economic standoff with Washington.

Key Developments

On May 2, China's Ministry of Commerce issued Announcement No. 21, activating the Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation. These rules—promulgated on January 9, 2021—had never been used prior to this announcement.

The directive instructs Chinese entities not to recognize, enforce, or comply with U.S. Executive Orders 13902 (2020) and 13846 (2018), which impose sanctions on entities trading with Iran.

This follows U.S. Treasury designations on April 24, 2025, of five Chinese refiners—Hengli Petrochemical (Dalian) and four smaller producers in Shandong and Hebei—for purchasing Iranian crude oil.

Mechanism of the Rules

Under the invoked rules, if a foreign bank, trader, insurer, or shipper ceases business with the named refiners to comply with U.S. sanctions, the refinery may seek damages through Chinese courts.

This establishes a direct legal counterweight to U.S. extraterritorial sanctions, allowing Chinese firms to sue foreign entities that comply with American penalties.

Diplomatic Context

The announcement was issued ahead of the scheduled meeting between President Donald Trump and President Xi Jinping in Beijing on May 14–15.

"U.S. secondary sanctions are illegal unilateral actions lacking United Nations authorization." — Chinese Foreign Minister Wang Yi

On May 4, U.S. Treasury Secretary Bessent appeared on Fox News and called on China to help reopen the Strait of Hormuz to relieve oil market pressure.

On May 6, Iranian Foreign Minister Araqchi visited Beijing and was welcomed by Chinese Foreign Minister Wang Yi. China publicly described the U.S. sanctions as illegal.

Trade and Commodity Actions

Separate diplomatic and economic moves have been reported:

• May 1: China eliminated tariffs on imports from 53 African countries.
• China has implemented visa-free entry for European nationals.
• Since 2018, China has built large strategic commodity reserves, including an estimated 1.4 billion barrels of crude oil (approximately 115 days of seaborne imports).
• Chinese state-owned companies Sinopec and Sinochem have resold West African crude to Asian refiners. In 2024, Chinese majors resold a record 1.31 million tons of LNG to South Korea, Thailand, Japan, Indonesia, and India.
• China maintains near-total control over production of certain rare earth elements—including neodymium, praseodymium, samarium, europium, gadolinium, and yttrium oxides—critical for defense and technology sectors.

International Responses

South Korea, Japan, and Indonesia have publicly thanked China for certain actions and have shifted diplomatic positions away from the United States, according to reports.

India is reportedly fast-tracking minority Chinese investment in seven economic sectors.

Perception Data

China's net global perception: +7%
U.S. net perception: -16% (down from +22% two years ago)

The Democracy Perception Index, released on May 8, reported these figures, highlighting a significant shift in global public opinion.

Implications

The invocation of the anti-sanctions law establishes a precedent for potential future use against other foreign sanctions. Analysts suggest that other BRICS nations may follow China's approach, though this remains speculative.

This move signals a new era in economic statecraft, where legal frameworks are deployed as direct counters to extraterritorial sanctions regimes.