China: Blocking rule reshapes risk calculus – MUFG

MUFG’s Michael Wan flags a significant shift as China formally invokes its 2021 Blocking Statute for the first time, targeting recent US sanctions on five Chinese refineries linked to Iranian Oil. He argues this alters secondary sanctions transmission, increases legal risk for third parties, and reflects China’s growing resilience and diversification away from the US Dollar system.

First use of Blocking Statute challenges US reach

"Meanwhile, China has for the first time since the passage of its Blocking Statue in 2021 formally invoked it, prohibiting compliance with recent US sanctions targeting five Chinese refineries on the grounds of participation in Iranian oil transactions."

"As such, third parties which fear and comply with US sanctions may now face Chinese legal risks if they continue to comply with US sanctions."

"The Blocking Rule is designed as such to change the transmission mechanism of US secondary sanctions, by telling market participants that complying with unjustified US extra-territorial sanctions may not necessarily be the “safe option”."

"Overall, we think this is a very significant development and is worth watching closely, and not just because it comes ahead of a planned summit between President Xi and Trump."

"Moving forward as such, it seems fair to expect more offensive measures by the Chinese side to protect China’s interest, and especially if this example ultimately showcase China’s ability to push back against the enforcement of US sanctions."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)