[News] China’s counter-sanctions shield: How Beijing is turning the Iran war into a petroyuan test

[Anti-Imperialist News]

 China’s counter-sanctions shield: How Beijing is turning the Iran war into
a petroyuan test

Washington’s sanctions weapon is meeting a market too large to isolate –
and a legal order Beijing now appears willing to enforce

Cynthia Chung <https://thecradle.co/authors/cynthia-chung-56>

MAY 14, 2026 -
https://thecradle.co/articles/chinas-counter-sanctions-shield-how-beijing-is-turning-the-iran-war-into-a-petroyuan-test
Photo Credit: The Cradle

When US President Donald Trump visited Beijing on 14 May, flanked
<https://thecradle.co/articles-id/37679> by top American industrialists,
the optics told their own story. Washington came armed with tariffs,
secondary sanctions <https://thecradle.co/articles-id/37649>, port fees,
and threats over maritime chokepoints. But the executives at Trump’s side
revealed the weakness behind the pressure campaign – the US cannot cut
China out of the global economy without cutting into itself.

That confrontation explains why Trump’s Beijing delegation mattered. The
presence of American executives from finance, technology, manufacturing,
and logistics was not a show of US strength alone. It was an admission that
corporate America still needs the Chinese market, supply chain, and
payments ecosystem at the very moment Washington is trying to discipline
all three. That contradiction now sits at the center of the present global
crisis.

*Beijing draws its legal lines*

That is the real context for Beijing’s new legal architecture. On 7 April
2026, the Chinese State Council promulgated Decree No. 834, the Regulations
on the Security of Industrial and Supply Chains. Less than a week later, on
13 April, it issued Decree No. 835
<https://www.morganlewis.com/pubs/2026/04/china-issues-new-regulations-on-countering-foreign-extraterritorial-jurisdiction-what-mncs-need-to-know>,
the Regulations on Countering Foreign Improper Extraterritorial
Jurisdiction. Both took effect immediately.

Together, these measures mark a shift from reactive Chinese complaints
about US overreach to a formal countersanctions framework that can target
commercial conduct, regulatory compliance decisions, cross-border legal
conflicts, and foreign attempts to impose unilateral rules on Chinese
entities.

Beijing has turned Washington’s sanctions regime into a legal battlefield,
arming itself to punish the governments, firms, and institutions that
enforce US extraterritorial pressure.

This is why the US war against Iran now carries consequences far beyond
West Asia. It is testing the dollar’s role as the currency of global oil
trade and accelerating the emergence of Chinese-backed payment channels
designed to bypass the western financial system. As Iran holds firm over
the Strait of Hormuz, negotiations are taking shape for yuan-traded oil
<https://thecradle.co/articles/xi-of-arabia-and-the-petroyuan-drive> in
return for safe passage through the waterway.

Iran’s parliament has also officially approved
<https://economictimes.indiatimes.com/news/international/world-news/irans-parliament-security-committee-approves-plan-to-impose-tolls-on-strait-of-hormuz/articleshow/129916278.cms>
the implementation of tolls of up to $2 million on oil vessels transiting
through the strait, which are also likely to be paid in yuan.

Deutsche Bank has stated
<https://www.bloomberg.com/news/articles/2026-03-25/iran-war-could-be-making-of-the-petroyuan-deutsche-bank-says>
that the Iran war could be the making of the petroyuan. That would signify
the end of US dominance over global finance and trade, and with it,
Washington’s self-appointed role as the world’s policeman.

The petrodollar is the foundation of dollar dominance in world trade. It
sustains the dollar as the global reserve currency and gives Washington its
‘big stick <https://thecradle.co/articles-id/1303>’: the ability to
weaponize sanctions, isolate individuals and institutions, and cut entire
states off from global commerce.

In response to this threat, the US Treasury Department has issued another
warning <https://x.com/USTreasury/status/2044122873036673130>: any
financial institution caught supporting Iran may face secondary sanctions.
At this stage, the policy resembles economic carpet bombing.

*Beijing stops playing defense*

The threat is aimed largely at the alternative systems
<https://thecradle.co/articles/new-currency-of-power-how-the-global-south-is-dismantling-dollar-supremacy>
China has used to circumvent US sanctions on Russia, Venezuela, and Iran.
Since Iran came under heavy sanctions, Beijing has been developing modes of
trade that bypass the sanctions laws of the western financial system.

In fact, China does not legally recognize unilateral sanctions on
countries, having passed the Anti-Foreign Sanctions Law (AFSL) in June
2021.

Chinese individuals and businesses can still be cut out of the western
financial system by US measures. Beijing cannot prevent Washington from
weaponizing access to US-controlled networks. But the Chinese state does
not recognize those measures as lawful and refuses to enforce them.

In other words, if Chinese institutions find other means of trading with
sanctioned entities, including sanctioned countries, the Chinese government
will not treat that conduct as a violation.

Decrees 834 and 835 now deepen that posture. China has moved from ad hoc
countermeasures to a comprehensive, multiagency countersanctions legal
framework
<https://www.morganlewis.com/pubs/2026/04/china-issues-new-regulations-on-countering-foreign-extraterritorial-jurisdiction-what-mncs-need-to-know>
capable of addressing commercial conduct, regulatory compliance choices,
and cross-border legal conflicts. US sanctions threaten to cut targeted
individuals, entities, and states from global trade. But in a world
increasingly dependent on Chinese trade, Beijing increasingly holds cards
Washington cannot easily match.

Because China rejects the legitimacy of unilateral sanctions –
overwhelmingly wielded by the US – it has now created a legal precedent to
respond with counter-sanctions. Crucially, this framework now reaches Hong
Kong, long treated as too sensitive to fold fully into Beijing’s
countersanctions system because of its role as an international legal and
financial hub.

The decrees give Beijing a weapon it lacked when the AFSL was passed in
2021: a legal shield for Chinese banks, insurers, ports, shippers, and
contractors caught between US pressure and Chinese national security law.
Multinationals now face the dilemma Washington has long imposed on others.
Obey US sanctions and risk Chinese penalties, or comply with Chinese law
and face American retaliation.

That hesitation has become harder to sustain. The war on Iran, the US
threat of secondary sanctions, and the pressure campaign over CK
Hutchison’s Panama ports have turned Hong Kong from a financial exception
into a national security question for Beijing.

*Iran oil builds the parallel economy*

Out of this pressure has grown a complex network engineered by China and
Iran to settle oil payments outside the international banking system. It
is, in effect, an oil-for-infrastructure arrangement that blends economic
barter with strategic investment, similar to China’s arrangement with
Venezuela under President Nicolas Maduro.

In return for Iranian oil, Chinese state-owned companies support Iran’s
transport, energy, and infrastructure sectors. Intelligence estimates
suggest roughly $8.4 billion moved through this channel in a single year.

This alternative network rests on two core pillars: Sinosure and Chuxin.

Sinosure is a state-owned export credit insurance agency that supports
Chinese exporters and overseas investment through risk coverage and
financing solutions.

Chuxin is a semi-covert financial entity that manages money flows between
Chinese contractors and Iranian oil entities while bypassing the
western-monitored banking system.

Much of this Chinese financing takes the form of export credit. Analysts
describe the arrangement as a “sanctions-parallel economy” combining
insurance tools, project finance, and barter-style settlement. It allows
Iranian oil to keep moving while turning western pressure into a pipeline
for Chinese-built infrastructure.

Iranian oil reaches China via convoluted maritime routes involving shadowy
ship-to-ship transfers and then blends the sanctioned oil with other Asian
crude grades, making source tracing difficult. In return, China pays by
financing long-term construction projects inside Iran, including airports,
refineries, and highways – effectively converting infrastructure into
indirect payment for oil shipments.

This cooperation between China and Iran reflects a quiet economic alliance
aimed at reshaping the global financial system toward reduced western
dependence – generating a parallel economic order based on goods, projects,
and alternative financing instead of hard currency controlled by
Washington.

Despite the US Treasury’s awareness of this mechanism, it has so far
imposed only limited sanctions on smaller Chinese entities. Major players
such as Sinosure and Chuxin remain untouched – largely due to their deep
entanglement in the global economy. It is the same reason why the US has
not sanctioned China as a whole; since China is so crucial to world trade,
it would be equivalent to sanctioning most of the world.

China’s trade weight is becoming an umbrella for states subjected to
weaponized US sanctions, which are no less destructive than direct acts of
war. If this approach continues to expand, it could become a cornerstone of
the global shift away from dollar-centered finance toward multi-track
economic systems.

*Hong Kong and the shadow-bank corridor*

Another component of this complex alternative system by the Chinese
consists of shadow banking. A Treasury Department analysis
<https://www.wsj.com/world/china/how-hong-kong-helps-the-flow-of-irans-hidden-billions-cfffb913?msockid=1e66efbf72236fb12e51f952738f6e4e>
found that entities in Hong Kong – most of them likely shell companies –
engaged in $4.8 billion in financial activity potentially related to
Iranian shadow banking in 2024.

Last year, the US imposed sanctions on five more companies in Hong Kong and
one in the mainland Chinese city of Shenzhen for allegedly acquiring
western parts and tools for Iranian drones.

Several top Hong Kong officials have also been hit with US sanctions. Hong
Kong Chief Executive John Lee, his predecessor Carrie Lam, and senior
police and security officials were targeted because Washington objected to
how they handled the 2019 Hong Kong protests.

As of November 2025, the US had imposed Iran-related sanctions on at least
366 entities
<https://www.wsj.com/world/china/how-hong-kong-helps-the-flow-of-irans-hidden-billions-cfffb913?msockid=1e66efbf72236fb12e51f952738f6e4e>
in mainland China or Hong Kong, according to the US–China Economic and
Security Review Commission. Some of those targets were accused of helping
to move Iranian oil, using front companies in Dubai and Hong Kong.

The system reportedly works like this. Money from oil sales moves through a
web of front companies, often routed through Chinese financial
institutions, to Hong Kong, before it is then converted into other
currencies.

Much of the cash from oil sales to China remains in bank accounts abroad,
in financial hubs such as Hong Kong, Dubai, and Singapore. Iranian
importers and exporters then trade foreign currency among their various
front companies on ledgers maintained in Iran.

These payments are largely routed through smaller Chinese banks that have
limited global operations and less to lose if they are sanctioned. Front
companies established by Iran in Hong Kong and elsewhere help manage the
proceeds.

One such bank, US officials say
<https://www.wsj.com/world/middle-east/how-china-helped-iran-cushion-the-blow-of-sanctions-and-fund-its-war-machine-6fa2847d?mod=article_inline>,
is the Bank of Kunlun. In 2012, Washington cut Kunlun off from the US
financial system for allegedly providing hundreds of millions of dollars in
financial services to Iranian banks, including moving money and paying
letters of credit. That punishment only solidified Kunlun as a preferred
channel for facilitating trade with Iran in China’s currency.

The bank grew rapidly. A “significant portion” of Iran’s oil revenue was
deposited at Kunlun as of 2022, according to the US Treasury
<https://www.wsj.com/world/middle-east/how-china-helped-iran-cushion-the-blow-of-sanctions-and-fund-its-war-machine-6fa2847d?mod=article_inline>.
According to indictments filed in US federal courts, front companies in
Hong Kong and elsewhere have been used to convert Chinese yuan into
dollars, euros, and other foreign currencies that Iran needs.

*Shadow fleets and maritime chokepoints*

The shadow fleet is the transport arm of this system. These vessels change
names and flags, report false GPS signals, go dark, report as different
ships during their journeys, and even duplicate transmissions to create
ghost ships.

There are now more than 1,470 tankers classed as being part of the shadow
or dark fleet, according to the ship monitoring website TankerTrackers.com,
which represents approximately 16.3–19.6 percent of tankers currently
transporting oil, oil products, and chemicals around the world.

Russia’s shadow fleet has also been trading oil in either rubles or Chinese
yuan, further undermining the petrodollar.

These shadow tankers often use a “flag of convenience” provided by smaller,
non-western nations such as Gabon, Comoros, or Cameroon. Flag states’ ship
registries are responsible for recording ship ownership and loans secured
against vessels, as well as investigating incidents. In return, the
shipowners pay fees. Some small states outsource their shipping registry to
third parties.

The Jun Tong oil tanker, known as the Fair Seas until January 2024, and the
Tai Shan until August, appear to be part of China’s shadow fleet. It has
sailed under
<https://www.wsj.com/business/logistics/a-shadow-fleet-smuggles-illicit-oil-across-the-high-seas-this-is-how-it-works-eb8c9954?mod=article_inline>
the
Cameroon flag, the flag of Malta, the flag of the Marshall Islands, and the
flag of Panama.

Shadow fleet vessels typically change ownership multiple times, reportedly
relying on shell companies in places with loose registration regulations,
such as Dubai, Hong Kong, and the Marshall Islands, to disguise the
identities of their ultimate owners.

*Panama becomes the pressure point*

In fact, the flag of Panama appears to be the second most prevalently used
flag amongst shadow vessels.

That is a major clue to the real story behind US pressure on Panama to oust
Hong Kong-based CK Hutchison from its two ports in the Panama Canal.

US sanctions are not working as intended. Washington has increasingly
resorted to enforcing unilateral sanctions through military force, as seen
in recent months when US forces seized shadow tankers such as the Bella-1.

If the US controls major maritime chokepoints such as the Panama Canal, it
can enforce unilateral sanctions by force while reserving the right to
charge selected vessels. Trump has already announced plans to impose “port
fees” on Chinese-built ships
<https://www.nbcnewyork.com/news/business/money-report/trump-is-targeting-china-made-containerships-in-new-flank-of-global-economic-war-on-the-oceans/6181349/>
passing through ports under US jurisdiction. These fees could reach $1.5
million per vessel.

This is the deeper logic behind BlackRock and MSC’s attempt to purchase 43
of CK Hutchison’s 53 ports internationally – and why China blocked the
sale. BlackRock was brought in under former US president Joe Biden's
administration to work for the US government and oversee the Build Back
Better World (B3W
<https://thecradle.co/articles/dead-on-arrival-the-wests-b3w-initiative-to-rival-chinas-bri>)
partnership, now called Global Infrastructure Partners (GIP)
<https://bidenwhitehouse.archives.gov/briefing-room/statements-releases/2024/06/13/fact-sheet-partnership-for-global-infrastructure-and-investment-at-the-g7-summit-2/>
.

BlackRock, the largest asset manager in the world, and its infrastructure
acquisitions are directly tied to the G7 agreement with GIP
<https://bidenwhitehouse.archives.gov/briefing-room/statements-releases/2024/06/13/fact-sheet-partnership-for-global-infrastructure-and-investment-at-the-g7-summit-2/>.
This relationship has continued under the Trump administration.

The GIP was designed to undermine China’s Belt and Road Initiative (BRI),
which is building critical infrastructure across the world. GIP, officially
owned by BlackRock
<https://www.blackrock.com/corporate/newsroom/press-releases/article/corporate-one/press-releases/blackRock-agrees-to-acquire-global-infrastructure-partners>,
is now attempting to purchase or find ways to seize strategic
infrastructure, as seen in Panama.

Panama, connected to Hong Kong through both CK Hutchison and possibly the
shadow fleet system, has faced intense pressure this year to seize the
ports under vague “constitutional” grounds that have not been clearly
specified. CK Hutchison is seeking arbitration.

This is where China’s April decrees matter most. In the Panama case, the
government’s claim that the seizure rests on constitutional grounds makes
the decision harder for Beijing to contest directly. But Panama now faces
potential economic consequences under Chinese law. Beijing reserves the
right to respond with sanctions of its own. Panama would not be the first
country to unlawfully seize major Chinese assets.

The warning is also aimed squarely at Washington. China is preparing to
respond if the US pushes further after kidnapping Maduro from Venezuela,
cutting off Cuba’s access to oil, freezing Iraqi oil revenue, and waging an
illegitimate war on Iran in the span of only a few months.

If Washington escalates its economic carpet bombing, Beijing now has a
legal arsenal with which to answer.

Alongside its rapidly growing Cross-Border Interbank Payment System (CIPS),
which can operate outside SWIFT, China is moving toward an alternative
financial system in which states can trade with whomever they choose, free
from the western financial diktat that has long functioned as the monetary
architecture of imperialism.

The war on Iran has dragged a parallel financial system into view, exposing
an architecture already built through years of sanctions pressure and now
pushed further into the open by every new US threat.
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