Washington has previously warned banks against dealing with companies allegedly involved in Iran’s oil trade

China’s Ministry of Commerce has instructed domestic companies not to comply with US sanctions targeting refiners allegedly linked to the Iranian oil trade.

Late last month, the US Treasury warned banks against dealing with so-called “teapot” refineries, privately owned companies which it said account for the majority of the oil China buys from Iran. “This revenue ultimately benefits the Iranian regime, its weapons programs, and its military,” the Treasury said in its notice.

China’s government and major state-owned companies have denied direct purchases of Iranian crude, while customs data have not recorded imports from Iran since 2023.

Beijing has argued that sanctions imposed without a UN mandate are illegal under international law. In a statement on Saturday, China’s Ministry of Commerce said the restrictions interfere with normal trade between its firms and third parties and banned compliance with the sanctions, citing “national sovereignty, security and development interests.”

A government spokesperson said the move would not affect China’s international obligations or its protection of foreign-invested firms.

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“The ministry will continue to closely monitor the improper extraterritorial application of foreign laws and measures, and will carry out further work in accordance with the law if such situations arise,” the spokesperson added.

Oil prices have surged since the US and Israeli attacked Iran in late February, prompting the closure of the Strait of Hormuz, a critical chokepoint handling about one-fifth of global oil and LNG flows.

While Iran has kept the vital waterway closed to “hostile ships,” the US Navy has maintained a blockade of Iranian ports in the Persian Gulf.

Despite a ceasefire declared nearly a month ago, prospects for a peace deal remain uncertain, as both sides have accused each other of pressing unacceptable terms. Oil prices surged past $120 per barrel this week for the first time since 2022.

The war has also pushed US President Donald Trump’s approval rating to record lows and deepened his rift with European allies, whose governments have refused to back operations against Iran.