China orders firms to ignore US Iran sanctions, daring US to enforce crackdown

China has ordered companies to disregard U.S. sanctions targeting Iranian oil, forcing a direct test of Washington’s ability to enforce its crackdown on Iran. 

A new directive, issued through China’s Commerce Ministry Sunday, invokes a 2021 "blocking statute" that prohibits firms from complying with foreign sanctions deemed illegitimate. The order applies to several Chinese refiners accused by the United States of purchasing Iranian crude, including major independent processors known as "teapot" refineries.

The move represents a shift from years of opaque workarounds to more explicit state-backed resistance, as Beijing signals it will not cooperate with U.S. efforts to cut off a key source of revenue for Iran.

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"This is unprecedented. It’s a major escalation in terms of China’s response to U.S. economic statecraft. It is a measure of defiance by Beijing," said Max Meizlish, a senior research analyst at the Foundation for Defense of Democracies.

The escalation comes as the Trump administration intensifies its sanctions campaign, targeting Chinese refiners and warning financial institutions they could face penalties for facilitating oil transactions between Iran and China.

Treasury Secretary Scott Bessent has accused Beijing of effectively financing Iran’s military activity through its oil purchases, arguing that Chinese demand is sustaining Tehran’s economy.

"China, let’s see them step up with some diplomacy and get the Iranians to open the strait," Bessent said in a Fox News interview Monday.

"Iran is the largest state sponsor of terrorism … China has been buying 90 percent of their energy, so they are funding the largest state sponsor of terrorism," he added.

China remains the primary destination for Iranian crude, with much of the country’s sanctioned oil exports flowing to Chinese refiners despite mounting U.S. pressure.

"It’s putting firms in China in the position where they either comply with the CCP order or the U.S. order and either way there could be consequences," Meizlish said.

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The issue is expected to be a major point of contention at an upcoming meeting between President Donald Trump and Chinese leader Xi Jinping.

At the same time, diplomacy is accelerating. 

Iranian Foreign Minister Abbas Araghchi arrived in Beijing Wednesday for talks with Chinese Foreign Minister Wang Yi, underscoring China’s growing role as both Iran’s primary oil customer and a key diplomatic interlocutor.

Despite mounting sanctions and a U.S. naval blockade aimed at restricting Iran’s oil exports, shipments have continued through increasingly opaque maritime networks. Data from maritime intelligence firm Windward shows a surge in vessels operating without tracking signals, with the majority of ships in the Strait of Hormuz recently going "dark," making enforcement significantly more difficult.

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In one recent snapshot, 146 of 167 vessels in the area were not transmitting location data, according to the report.

Windward analysts also identified continued covert loading activity at Iran’s main export hub at Kharg Island, including large crude carriers operating without tracking signals despite heightened enforcement pressure.

"I don’t expect this is going to necessarily change much by way of how China has helped facilitate Iranian sanctions evasion," Meizlish said.

Those flows have largely been sustained by demand from Chinese refiners, particularly smaller independent operators that often operate outside the U.S. financial system and are more insulated from sanctions pressure.

"This is really a clear attempt by Beijing to put the ball back in the U.S.’s court and see if it’s going to actually act," Meizlish added.

Beijing’s decision to formally instruct companies not to comply with U.S. sanctions adds a new layer of risk for global firms. The blocking statute allows Chinese companies to seek damages in domestic courts from banks, insurers, or shipping companies that cut ties in order to comply with U.S. measures.

Analysts say the move could force multinational firms into a difficult position, weighing access to the Chinese market against the risk of being cut off from the U.S. financial system.

"There’s no more important enabler to Iran than China," Meizlish said.

The standoff highlights a broader challenge for Washington: while sanctions remain a central tool of U.S. foreign policy, enforcing them against major economies like China, especially when transactions can be conducted outside the dollar system, is far more difficult.

Fox News Digital reached out to the Chinese embassy in Washington for comment.