Common Questions

What does China's Blocking Rules law actually do?: It prohibits named Chinese firms from complying with foreign sanctions (currently OFAC's Iran designations) and gives affected parties the right to sue compliant firms in Chinese courts under Article 9.Source: MOFCOM order, 2 May 2026
Why did China activate its Blocking Rules for the first time in 2026?: OFAC designated Hengli Petrochemical and four other Chinese refineries for buying Iranian crude; China responded by formally prohibiting those firms from complying, escalating the US-China dimension of the Iran sanctions war.Source: MOFCOM, Reuters
Which companies are covered by China's Iran sanctions blocking order?: Hengli Petrochemical (Dalian), Shandong Shouguang Luqing, Shandong Jincheng, Hebei Xinhai, and Shandong Shengxing — all independent refineries that had been buying Iranian crude.Source: MOFCOM prohibition order, 2 May 2026
Can a company be punished in both the US and China for the same sanctions decision?: Yes. After the 2 May activation, a firm that complies with US OFAC sanctions against the five named refineries violates Chinese law and faces Chinese court claims; not complying risks US enforcement action. This Catch-22 is the mechanism's intended effect.Source: Article 9, China Blocking Rules 2021
What is China's blocking law and what does it actually do?: China's Blocking Rules (formally the Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation) prohibit named Chinese firms from complying with foreign sanctions. Article 9 gives affected parties the right to sue compliant firms in Chinese courts for damages.Source: MOFCOM order, 2 May 2026
Have China's blocking rules ever been used before May 2026?: No. The rules were promulgated on 9 January 2021 but went unused for five years. The 2 May 2026 activation against OFAC's Iran sanctions was the first time MOFCOM formally invoked them.Source: MOFCOM; Reuters
Which Chinese refineries are protected by China's blocking rules order?: Hengli Petrochemical (Dalian), Shandong Shouguang Luqing, Shandong Jincheng, Hebei Xinhai, and Shandong Shengxing — all independent refineries that had been purchasing Iranian crude under OFAC sanction.Source: MOFCOM prohibition order, 2 May 2026
How do China's blocking rules compare to the EU's sanctions blocking regulation?: The mechanisms are structurally similar: both prohibit firms under their jurisdiction from complying with designated foreign sanctions, and both include private rights of action. The EU's Regulation 2271/96 was never invoked against the current Iran sanctions cycle; China's activation in May 2026 is the first formal use by any major power against OFAC's Iran campaign.Source: EU Regulation 2271/96; MOFCOM order

Background

China's Ministry of Commerce (MOFCOM) activated its 2021 Blocking Rules for the first time on 2 May 2026, issuing a prohibition order against five Chinese refineries named in OFAC's Iran sanctions. The rules, officially the Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures, came into force on 9 January 2021 but lay dormant for five years — Beijing had declined to use them against prior US sanctions rounds, preferring softer diplomatic protest. The activation was triggered directly by OFAC's designation of Hengli Petrochemical and four independent "teapot" refineries for purchasing Iranian crude.

The five named firms are Hengli Petrochemical (Dalian), Shandong Shouguang Luqing, Shandong Jincheng, Hebei Xinhai, and Shandong Shengxing. The legal basis cited by MOFCOM spans the National Security Law, the Law on Foreign Relations, and the Anti-Foreign Sanctions Law. Article 9 creates a private right of action in Chinese courts: any Chinese firm that complies with the blocked US sanctions can face compensation claims from affected parties. The mechanism mirrors the EU's own Blocking Regulation (Regulation 2271/96, reaffirmed via Delegated Regulation 2018/1100), which has similarly been used rarely in practice; the EU instrument was never invoked against the current Iran sanctions cycle, leaving China as the first major power to formally activate such a blocking order against OFAC's Iran campaign.

The activation creates a structural Catch-22 for multinational banks, insurers, and logistics firms: complying with US OFAC designations on the five named refineries now violates Chinese law; declining to comply risks US enforcement action. This deliberate counter-escalation puts multinationals in the crossfire between Washington and Beijing at a moment when China holds the UN Security Council presidency. The Blocking Rules are not exclusively an Iran-crisis instrument — their 2021 promulgation was driven partly by US tariff and tech-export actions against Chinese firms, and any future US-China-trade or semiconductor sanctions episode could trigger the same mechanism.

Source Material

MOFCOM Blocking Rules Activation Order, 2 May 2026

How the World Sees Them

China

Beijing frames the activation as a lawful defence of Chinese sovereignty against US extraterritorial overreach. The simultaneous UNSC presidency gives China an unusual dual platform: multilateral legitimacy plus unilateral economic counter-action on the same day.

United States

Washington views the activation as an attempt to undermine sanctions enforcement and shield Iranian oil revenue from OFAC action. US multinationals exposed to both jurisdictions now face legal jeopardy on both sides of the Pacific.

European Union

European banks and insurers financing transactions with the five named refineries face conflicting legal obligations under US and Chinese law. Brussels has not invoked its own analogous blocking instrument (Regulation 2271/96) against this sanctions cycle, leaving China to lead the formal resistance.