China has formally shielded five mainland companies from US secondary sanctions linked to Iranian oil transactions, creating a rare confrontation between Chinese law and Washington’s extraterritorial measures. This move poses a ‘compliance squeeze’ for Chinese banks, forcing them to navigate between US sanctions and Chinese law. The US has warned Chinese banks could face secondary sanctions if Iranian funds are found in their accounts.
As the United States pressures China to secure cooperation on Iranian crude oil purchases amid ongoing tensions, China has instructed domestic companies to ignore US sanctions, escalating the situation. This move is seen as China's long-term strategy to counter the US's sanctions power, following the ‘no-limits cooperation’ with Russia. The US imposing sanctions on Hengli Group and hinting at secondary sanctions on Chinese banks further intensifies diplomatic tensions between the two countries.