China voids U.S. sanctions on five refineries; Brent tops $120
China’s Ministry of Commerce used its 2021 blocking statute on May 2 to void U.S. sanctions on five refineries; Brent briefly rose above $120 per barrel.
On May 2 China’s Ministry of Commerce invoked the 2021 anti-sanctions blocking statute to void U.S. sanctions on five Chinese refineries, naming Hengli Petrochemical, Shandong Jincheng, Hebei Xinhai, Shouguang Luqing and Shandong Shengxing.
MOFCOM ordered Chinese firms not to recognize, enforce or comply with the U.S. measures and referenced Executive Orders 13902 and 13846, which target entities for involvement in Iranian oil transactions. The ministry characterized the U.S. actions as unlawful extraterritorial overreach and stated they violated international law.
The announcement arrived while major markets were closed. Spot Brent briefly topped $120 per barrel before retreating to about $114.16 at the U.S. market open. Crude futures showed limited reaction during thin trading.
Industry sources and public records indicate Hengli faces accusations of buying billions of dollars of Iranian crude since 2023. Traders and analysts note the use of ship-to-ship transfers and a so-called shadow fleet to obscure cargo origins.
The injunction shields the named refiners from domestic pressure to comply with U.S. sanctions but does not remove exposure to dollar-denominated transaction risks tied to correspondent banking relationships. Washington last week warned global banks about handling trade flows linked to the refineries near the Strait of Hormuz, and officials have not ruled out U.S. penalties for banks that process related payments.
Market participants flagged potential effects on inflation expectations and on risk assets if oil prices remain elevated. Some traders pointed to past cycles in which large oil shocks influenced bitcoin and other volatile assets. Iran has separately requested that some tankers pay transit fees in cryptocurrency.
Beijing has promoted yuan settlement and developed digital currency rails for cross-border trade. Analysts note the MOFCOM order is the first formal use of the 2021 blocking rules and that the next question is whether other companies will invoke the statute to contest U.S. secondary sanctions.
U.S. authorities could respond by targeting banks and intermediaries with secondary sanctions. Market participants will watch diplomatic engagement between U.S. and Chinese leaders for any changes to energy and sanctions policy.
The injunction represents the first formal test of China’s blocking statute and will involve legal, financial and diplomatic considerations for companies, banks and governments engaged in energy trade.
