China asks banks to pause new loans to US-sanctioned refiners, Bloomberg News reports

• Banks were told to suspend new yuan-denominated loans but not recall existing credit, based on verbal guidance from the National Financial Regulatory Administration issued before May 1
• The U.S. Treasury sanctioned Hengli Petrochemical in April for buying billions of dollars in Iranian oil, part of Washington's efforts to curb Tehran's oil revenue
• China's Commerce Ministry issued blocking measures on May 2 to protect Chinese firms from the U.S. sanctions, marking the first time China used such tools introduced in 2021

Summary

China's National Financial Regulatory Administration (NFRA) has instructed major Chinese banks to temporarily halt new yuan-denominated loans to five refineries recently sanctioned by the U.S. for purchasing Iranian oil, according to Bloomberg News. The verbal guidance, issued before May 1, applies to companies including Hengli Petrochemical (Dalian) Refinery, China's largest private refiner. Banks were told not to call in existing credit.

Key Development: In April, the U.S. Treasury sanctioned Hengli Petrochemical for allegedly buying billions of dollars in Iranian oil, part of Washington's ongoing effort to restrict Tehran's oil revenue. U.S. Treasury Secretary Scott Bessent warned that banks processing transactions with Iran would face secondary sanctions.

Conflicting Signals: The NFRA's directive contrasts with a May 2 notice from China's Ministry of Commerce urging firms to dismiss the U.S. sanctions—marking the first time China deployed blocking measures introduced in 2021 to protect domestic companies from foreign intervention.

Market Impact: The U.S. sanctions have created operational challenges for affected refineries, including difficulties receiving crude oil supplies and forcing them to sell refined products under different names. The banking restrictions add further pressure on these sanctioned entities' operations and financing capabilities.

Sector Implications: This development highlights escalating tensions between the U.S. and China over Iranian oil trade, with China's financial sector caught between competing government directives and international sanctions compliance. The situation creates uncertainty for China's refining sector, particularly large private operators with potential Iranian oil exposure.

Reuters could not independently verify the Bloomberg report, and neither NFRA nor Hengli responded to requests for comment.