China invokes Anti‑Sanctions Law; banks halt loans to refiners

On April 24 the U.S. Treasury imposed sanctions on five Chinese refiners, including Hengli Petrochemical, under executive orders intended to reduce Iran’s oil revenue. The Treasury accused the companies of buying Iranian crude in violation of U.S. sanctions.

On May 2 China’s Ministry of Commerce issued Announcement No. 21, invoking the Anti‑Sanctions Law adopted in 2021. The announcement directed Chinese entities to disregard the U.S. penalties and described legal mechanisms for affected companies to pursue foreign parties that comply with the sanctions in Chinese courts.

Following the public directive from Beijing, several state-affiliated Chinese banks received instructions to pause new loans to the sanctioned refiners. The lending pause directly affects the firms named by Washington and limits their access to fresh financing.

Many Chinese banks operate in dollars and maintain correspondent banking relationships with U.S. institutions. That exposure creates a risk of secondary U.S. enforcement if banks finance transactions tied to the sanctioned companies, a factor cited by market participants as influencing the lending restrictions.

Legal experts note the Anti‑Sanctions Law provides a framework for Chinese companies to sue foreign entities that follow extraterritorial sanctions. The law does not remove the practical impact of banks withdrawing credit or the operational challenges that can follow.

U.S. officials are expected to consider waivers for some of the sanctioned refiners; sources indicate any relief would likely be applied selectively among the five companies.

The U.S. sanctions and China’s invocation of its Anti‑Sanctions Law came days before a scheduled meeting between President Trump and President Xi Jinping. After the announcements, President Trump praised U.S.-China economic ties.

The sequence of actions has created a compliance dilemma for multinational corporations and banks operating across both jurisdictions: continuing trade with the sanctioned firms risks U.S. penalties, while severing ties could expose companies to legal action under Chinese law. Financial institutions with significant U.S. exposure appear to be limiting new credit to the affected refiners as governments maintain formal positions ahead of the diplomatic meeting.