JIIA Strategic Comments (2026-15) Caught in the Crossfire: The Weaponization of Economic Interdependence and the Rise of Strategic Litmus Tests

Papers in the "JIIA Strategic Commentary Series" are prepared mainly by JIIA research fellows to provide comments and policy-oriented analyses of significant international affairs issues in a readily comprehensible and timely manner.

Introduction

As interstate competition becomes increasingly pronounced in the international arena and the logic of foreign policy and national security permeates the sphere of economic activity, states have shown a growing tendency to mobilize economic instruments in pursuit of political objectives. In recent years the “weaponization of economic interdependence” arising from interstate conflicts has expanded beyond bilateral relations to the extraterritorial application of such measures, thereby drawing third states into increasingly institutionalized patterns of coercive economic interaction. In this context, the reciprocal economic measures between states generate pressures on third states to comply with mutually incompatible regulatory and institutional systems. As a result, these dynamics have produced structures that compel third states to undergo a form of strategic litmus test, forcing them to choose which institutional or economic sphere to support.

If the achievement of security for the economic system and its constituent actors is understood as one dimension of economic security, third states, including Japan, are increasingly compelled to pursue their own economic security while simultaneously being caught in the crossfire of reciprocal economic measures arising from intensifying interstate competition. Against this backdrop, this paper examines the emerging economic security challenges generated by the spread effects of the weaponization of economic interdependence arising from interstate competitions and explores the appropriate responses available to Japan and other third states.

The Weaponization of Economic Interdependence Beyond Dyads

It became evident that weaponized economic interdependence had entered a new phase when Chinese authority announced in 2026 the implementation of countermeasure against the secondary sanction imposed by the US government. As the reciprocal exchange of economic sanctions and countermeasures among competing great powers intensified, this evolving structure generated a strategic dynamic that compelled third states to choose between competitive institutional and economic spheres.

China has not remained entirely passive in response to foreign economic sanctions and related restrictive measures. Under the “Export Control Law of the People's Republic of China,” which entered into force on December 1, 2020 as China’s foundational export control legislation, Chinese authority is empowered to place importers and end-users who “endanger national security and interests” on a “controlled party list” and to prohibit or restrict transactions relating to controlled items with listed entities (Article 18). Furthermore, Article 48 of the law establishes the principle of reciprocity regarding export controls, specifically stipulating that “[t]he People’s Republic of China may, depending on the actual situation, take reciprocal measures against any country or region that abuses export control measures and endangers the national security and interests of the People’s Republic of China.”

Furthermore, the Anti-Foreign Sanctions Law, which was promulgated and came into effect in June 2021, has become the principal legal framework governing China’s countermeasures against foreign sanctions imposed on China. Article 3 of the Law provides that “where foreign nations violate international law and basic norms of international relations to contain or suppress our nation under any kind of pretext or based on the laws of those nations to employ discriminatory restrictive measures against our nation's citizens or interfere with our nation's internal affairs, our nation has the right to employ corresponding countermeasures.” In addition, Article 4 of the Law stipulates that “the relevant departments of the State Council may decide to enter persons or organizations that directly or indirectly participate in the drafting, decision-making, or implementation of the discriminatory restrictive measures provided for in Article 3 of this Law into a countermeasure list.” Organizations or individuals included on this list may be subjected to a range of countermeasures, including visa restrictions, the freezing of assets located within China, and prohibitions on transactions with organizations and persons within mainland China (Article 6). Moreover, Article 12 stipulates that “organizations and individuals must not enforce or assist in enforcing the discriminatory restrictive measures employed by foreign nations against our nation's citizens or organizations,” thereby establishing a legal basis for prohibiting both domestic and foreign entities from complying with foreign restrictive measures targeting China. Nevertheless, the application of this provision remained relatively limited, and the number of actual enforcement cases was small. As a result, the practical effectiveness of this regulation was not necessarily significant.¹

However, the reciprocal exchange of economic sanctions and countermeasures is now entering a new phase. This transformation is driven by the weaponization of economic interdependence associated with interstate competitions, which has extended beyond the bilateral relationships between the states imposing such measures to encompass third states through the extraterritorial application of such measures. As a result, the interaction between economic sanctions and countermeasures places third states in a situation where multiple, and potentially conflicting, regulatory frameworks intersect. Under such circumstances, governments or businesses in third states may violate the regulatory framework of one state by complying with the legal or institutional requirements imposed by another, thereby exposing themselves to punitive measures from the former. Conversely, failure to comply with the latter’s regulatory framework may result in sanctions imposed by that state. Accordingly, the structure generated by the extended weaponization of economic interdependence places governments and firms in third states in a position of competing compliance obligations, compelling them to choose between competitive regulatory and institutional systems.

This situation was brought into sharp relief by the countermeasures enacted by the Ministry of Commerce of China (MOFCOM) on May 2, 2026, in response to sanctions imposed by the US government targeting Iran’s oil trade. MOFCOM enacted measures prohibiting approval, enforcement, or compliance with US sanctions on five Chinese oil refiners for their involvement in transaction related to Iranian oil.² This countermeasure was implemented within the legal framework constituted by the National Security Law of the People’s Republic of China, the Law on Foreign Relations of the People’s Republic of China, the Anti-Foreign Sanctions Law, and their associated implementing regulations. Of particular significance was the apparent full-scale application, for the first time, of the Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures, which had been promulgated and entered into force in January 2021.³ Chinese oil refiners whose interests have been harmed by US sanctions may now file lawsuits in Chinese courts against businesses that comply with US sanctions, including banks that refuse payment, insurance companies that decline underwriting services, and shipping companies that refuse to transport cargo.⁴ In this context, compliance with US regulatory measures has become conduct that may give rise to liability under China’s legal regime.

The Chinese government has traditionally criticized financial sanctions and export control measures imposed by the US and other states as unilateral and discriminatory, consistently denying their legitimacy. At the same time, however, Chinese authorities have, to a certain extent, tacitly tolerated the de facto compliance of domestic companies with economic sanctions imposed by the US and other state to mitigate adverse effects on its own economy stemming from restrictions on access to the US market and the US-centered international financial system. By contrast, the recent measures indicate a markedly more proactive and confrontational posture on the part of the Chinese government. In addition to explicitly signaling that domestic entities should refrain from complying with US sanctions, the authorities have introduced countermeasures designed to deter third states and foreign businesses from adhering to such sanctions.

However, the US government has not shown any willingness to compromise regarding these efforts by the Chinese government. At a press conference, US Secretary of State Marco Rubio clearly stated that companies that ignore US sanctions against Iran could be subject to secondary sanctions by the US: “[A]ny foreign financial institution or commercial actor that enables Iran’s sanctions evasion is going to face secondary sanctions exposure and a loss of access to the US financial system…If you ignore our sanctions, you’re going to face secondary sanctions. …, but we don’t do these things for symbolic purposes.”⁵

Furthermore, when asked whether President Donald Trump would impose secondary sanctions on Chinese financial institutions, Secretary Rubio stated, “We’re going to enforce our sanctions,” adding, “That will have to come from Treasury, but we have sanctions in place, and sanctions don’t mean anything unless you’re going to do something about them. So I think that’s been clear. I think the Treasury will follow up with any specific announcements.” He continued: “Suffice it to say we’re serious about our sanctions. A cost needs to be imposed on Iran for what they are doing; otherwise, if they get away with this, guys, if they get away with pulling this thing off without paying a price for it and backing down, you are going to see multiple places around the world where other countries are going to be tempted to do the same. This is unacceptable.”⁶ The US government has thus clearly indicated its policy of applying secondary sanctions not only to US persons, but also entities in third states that engage in conduct deemed to violate US sanctions.

In response, the Chinese side has also objected to the US government’s stance. When asked at a press conference for his opinion on US Secretary of State Rubio’s remarks regarding the Chinese government’s measures, Chinese Foreign Ministry Spokesperson Lin Jian stated that China's competent authorities have stated their position, asserting that China would be keeping a close eye on the unjustified extraterritorial application of foreign legislation and measures by relevant countries while firmly safeguarding the legitimate rights and interests of Chinese citizens and companies in accordance with the law. Furthermore, the spokesperson declared that MOFCOM will continue to closely monitor cases of improper extraterritorial application of foreign laws and measures. In light of this, the Chinese Communist Party-affiliated Global Times reported that, where circumstances prescribed by the 2021 Rules exist, MOFCOM will carry out follow-up assessments in accordance with the law.⁷ China has indicated its intention to implement similar countermeasures should economic sanctions targeting China be introduced or further intensified by the US and other foreign states.

These measures by the Chinese government indicate a transition from the opaque and indirect forms of evasion that traditionally characterized China’s responses to economic measures and sanctions imposed by foreign governments, including the US, toward a more explicit and confrontational state-led approach. This series of measures institutionalizes resistance to foreign laws with extraterritorial application, suggesting that the economic security competition between the US and China is entering a new phase in which third states are increasingly compelled to choose between competing regulatory and economic spheres.

Extending Weaponization of Economic Interdependence Beyond the US–China Case

It is unlikely that the reciprocal exchange of extraterritorial measures emerging in the context of US-China competition will remain confined to the bilateral relations between the two states. Rather, similar dynamics may arise in a broader range of strategic contexts beyond the US-China case. Indeed, reciprocal exchange of measures involving the extraterritorial application of regulations is already observable in relations between China and the European Union (EU). On April 24, 2026, MOFCOM announced the addition of seven European companies to its export control list and prohibited the export of dual-use goods to those firms, with immediate effect.⁸ This measure has been interpreted by some as a countermeasure in response to the inclusion of Chinese companies in the EU’s sanctions package against Russia.⁹ Particularly noteworthy in light of this article is the fact that the measures include explicit controls on the re-export of China-origin items. Under the relevant Chinese regulations, even companies located outside China are, in principle, prohibited from re-exporting China-origin dual-use items to the seven designated companies.¹⁰ Although MOFCOM has indicated that licensing procedures remain available for exceptional cases, such transactions are permitted only upon approval by the ministry.¹¹

Thus, a reciprocal exchange of economic sanctions and countermeasures is already emerging between China and Europe, and the possibility cannot be excluded that this dynamic may evolve into a confrontational structure comparable to that observed in the US-China case. Moreover, similar exchanges of economic sanctions and countermeasures may also be developing between China and states beyond the US and Europe, giving rise to increasingly complex patterns in the weaponization of economic interdependence. Furthermore, this process may create circumstances in which third states are compelled to choose between mutually incompatible institutional and economic spheres, thereby intensifying the strategic and regulatory dilemmas faced by governments and businesses operating among competitive powers.

Indeed, the future trajectory of the reciprocal exchange of economic sanctions and retaliatory measures between the US and China remains uncertain. During the US-China summit held on May 15, 2026, the two leaders reportedly discussed the sanctions imposed by the US government on Chinese oil refiners as part of its sanction regime targeting Iran. Following the summit, President Trump acknowledged that they had discussed the issue and stated, “I'm going to make a decision over the next few days,” indicating that the US response remained under consideration.¹²

From a medium- to long-term perspective, however, the fundamental structure in which third states such as Japan are compelled to pursue economic security while situated between competing great powers is unlikely to undergo substantial change. The weaponization of economic interdependence arising from interstate competition is already placing increasing pressure on governments and private companies to reconstruct and diversify supply chains. Most notably, efforts to enhance resilience by securing alternative supply sources, expanding strategic stockpiles, and mitigating supply-chain vulnerabilities are accelerating a transition toward economic activities that prioritize not only economic efficiency but also considerations of safety and security. Moreover, the weaponization of economic interdependence involving third states is likely to expand further across multiple states and regions in the future. As this process unfolds, situations in which third states are caught between mutually incompatible institutional and regulatory demands imposed by competitive powers may become increasingly pronounced.

Preparing for the Strategic Litmus Tests

The reciprocal weaponization of economic interdependence undertaken by the US and Chinese governments has increasingly been structured in ways that draw third states into their strategic competition. Moreover, this dynamic is not necessarily confined to US-China relations; it cannot be excluded that similar patterns may emerge in relations among other states in the future. Under such conditions, Japan and other third states are progressively compelled to formulate their own economic security policies on the assumption that interstate exchange of economic sanctions and countermeasures involving extraterritorial application will persist and expand. As third states become caught in the crossfire of intensifying sanctions and reciprocal retaliatory measures, these dynamics lead to not only the fragmentation and contraction of supply chains but also to situations in which states are induced to choose between competing institutional and regulatory demands. Consequently, third countries are being required more and more to pursue economic security from an integrated perspective encompassing national security policy, economic policy, and legal and regulatory systems.

That said, the direct consequences of the escalating economic conflict between the US and China are likely to be felt most immediately by businesses operating within the two states. For example, if a US company suspends or reduces transactions with Chinese oil refiners subject to sanctions in compliance with US laws and regulations, that company may incur liability under China’s legal regime and be statutorily required to compensate Chinese entities for any damages arising from such actions. Accordingly, US companies may be forced to reassess and restructure their supply chains.

In addition, Chinese businesses may find it necessary to re-examine their compliance systems and risk management policies relating to foreign transactions. Chinese banks maintaining business relationships with oil refiners designated under US sanctions, for instance, may be compelled to modify their business practices, adopt more stringent screening procedures for transactions involving sanctioned oil refiners and even scale back or reconsider those transactions to mitigate the risk of violating US sanctions. At the same time, China is expected to promote renminbi-denominated transactions as a means of circumventing US-centered financial sanctions. Furthermore, relevant Chinese regulations incorporate mechanisms allowing companies to apply for exemptions, so compliance with US regulations may, in exceptional circumstances, be permitted where strict adherence to Chinese countermeasures would be significantly difficult.¹³

However, the effects of reciprocal weaponization of economic interdependence extend beyond businesses operating in the US and China. As noted above, third states face the risk of incurring liability under Chinese law if they comply with US sanctions, while simultaneously confronting the possibility of secondary sanctions imposed by the US should they fail to comply with those measures. This reciprocal weaponization of economic interdependence through extraterritorial application creates a structure in which third states are compelled to respond to mutually incompatible regulatory demands, effectively placing them in a position where they must choose between competing institutional and economic spheres. Consequently, the pursuit of economic security under such crossfire conditions has emerged as a critical challenge for third states.

As competition between great powers intensifies, third states situated between the mutually incompatible institutional and regulatory frameworks of the competitive powers face increasingly limited strategic options. Governments and businesses in states that are highly dependent on the US-centered financial system and access to US markets are essentially put in a spot where compliance with the US regulatory framework becomes difficult to avoid. Such businesses are required to demonstrate their commitment to the US institutional and economic sphere and, to a certain degree, to implement measures directed against China in accordance with US policy demands. These will likely remain rational choices for these businesses – despite the possibility of incurring certain losses in the Chinese market – as long as the benefits gained from maintaining access to the US-led economic sphere outweigh those losses. Some firms may therefore choose to reduce or sever economic ties with China to preserve or expand their access to the US market. This process may, in turn, accelerate the “de-Sinicization” of supply chains.

Conversely, states and companies that are highly dependent on the Chinese market or on China-centered supply chains are likely to move toward greater compliance with Chinese regulatory frameworks. There may emerge a tendency among foreign businesses to stabilize supply chains by relocating production and related operations to China and by establishing systems capable of completing production, assembly, and service provision entirely within China. In addition, efforts toward de-dollarization or yuanization might be pursued as means of mitigating the impact of US sanctions. China could also seek to encourage or pressure third states to withdraw from, or refrain from participating in, US regulatory measures targeting China. Should third states fail to comply with such expectations, they may be subjected to numerous economic and political pressures through economic coercion or the broader weaponization of economic interdependence by China.

Although such scenarios may be conceptually straightforward to describe, their actualization is far from simple. Businesses in third states that maintain commercial relationships with both US and Chinese companies may simultaneously face pressure from the US to restrict transactions with China and pressure from China to preserve the stability of existing supply chains. Under such crossfire conditions, achieving comprehensive legal and economic decoupling—defined as exclusive alignment with either US or Chinese regulatory and institutional regimes, the confinement of economic activities to a single sphere, and the effective disregard of the other side’s regulations and market—appears exceeding difficult to realize in practice.

Third states—including Japan, which is increasingly being obliged to take a position amid the US-China competition—must institute measures aimed at ensuring economic security under such crossfire conditions. This requires not only the development of institutional and policy frameworks designed to restrain the reciprocal weaponization of economic interdependence, but also the advancement of measures to mitigate or neutralize friction arising from potentially conflicting domestic legal requirements.

First, as a measure for businesses operating within competitive regulatory environments, some recommend the inclusion of contractual clauses that permit the suspension or refusal of contractual obligations in cases where compliance with sanctions would be illegal or would expose a party to significant legal risk. In addition, it may be effective to address conflicting legal obligations directly by expressly stipulating that the parties shall not be required to engage in conduct that would violate applicable laws and regulations, including sanctions and countermeasures, in relevant jurisdictions,.¹⁴

Second, businesses in third states need to prepare for future regulatory changes and potential expansions of sanctions regimes while minimizing legal and economic risks as much as possible. This may necessitate a comprehensive review of pending orders, products awaiting shipment, technology transfers, after-sales service, and other related business activities. In undertaking such reviews, due diligence should extend beyond the official names and aliases of business partners to include capital relationships, the involvement of intermediaries, and sanctions-related information more broadly.

Third, it is important for businesses in third states to verify in advance the states of origin of the goods, technologies, and software they handle, as well as the extent to which such items are subject to regulatory controls in various jurisdictions, as measures adopted by both the US and China can include restrictions on the re-export of items originating from their respective jurisdictions, even when such items are located outside their territorial borders. Accordingly, businesses in third states should not assume that they are exempt from these regulatory frameworks merely because shipments originate from regions other than the US or China.

These countermeasures are not necessarily comprehensive or exhaustive. Nevertheless, as the weaponization of economic interdependence intensifies, third states must prepare for situations in which they must choose between incompatible regulatory and economic spheres. Governments and businesses in third states caught in the crossfire of international competition will increasingly be required to anticipate risks arising from sanctions, export controls, extraterritorial regulations, and related measures. Accordingly, third-state governments must not only support corporate efforts to strengthen and diversify supply chains, but also promote domestic measures, including the development of relevant legal frameworks, aimed at mitigating the negative effects of conflicting compliance obligations generated by interstate competition on domestic economic activity and business operations. Policy issues warranting consideration include the establishment of a trade insurance system to compensate companies adversely affected by crossfire conditions and the introduction of countermeasures against states imposing secondary sanctions. These challenges may constitute a central dimension of the economic security strategies that third states will be required to pursue amid intensifying international competition.

Conclusion

The strategic competition between the US and China has seen reciprocal weaponizing of economic interdependence. In particular, US sanctions against Iran have served as a catalyst for the mutual imposition of sanctions and countermeasures by the US and China, while their extraterritorial application has entered a new phase that draws third states ever more into the game. Throughout this process, both states have competitively broadened and reinforced their regulatory frameworks, thereby further evolving and institutionalizing their economic security architectures. As a consequence, the exercise of economic pressure through interdependence has expanded in a chain-reaction-like manner, intensifying legal and institutional friction within the international economy. Furthermore, the structure observed above is not necessarily confined to US-China relations and can also be seen in relations between China and Europe. A distinct possibility exists that a more complex structure may develop in which the weaponization of economic interdependence transcends multiple bilateral relationships while simultaneously drawing third states into overlapping regulatory and strategic games.

Given that China has developed legal instruments to counter foreign sanctions and has demonstrated a willingness to actively employ them, the economic security challenges arising from interstate competition can no longer be understood solely in such terms as the financial system, export controls, or supply chain chokepoints. Rather, there is increasing need to examine the broader effects that competing legal and regulatory measures—and the countermeasures adopted in response to them—may exert on third states and on the international economy.

That said, it is difficult at this point to determine whether these developments will have an immediate and serious impact on the international economy as a whole because the five Chinese companies targeted by US sanctions possess only limited influence within international trade, and their direct impact on global market remains comparatively modest.

From a medium- to long-term perspective, though, the potential implications of these measures on the international economic order are by no means inconsequential. As noted above, the Chinese government has indicated that it intends to adopt countermeasures like those being implemented at present should the US government impose additional sanctions against China or should other state governments introduce sanctions targeting Chinese entities. If the US government further steps up sanctions against Iran or introduces new sanctions against other countries, thereby bringing additional Chinese entities under foreign sanction, China may very well opt once again to implement or increase comparable countermeasures. Moreover, the weaponization of economic interdependence not only in US-China relations but also in relations between China and other states/regions such as Europe could gravely impact the international economy, depending on the economic weight of the targeted Chinese entities and their positions within supply chains.

As discussed in this paper, the reciprocal weaponization of economic interdependence among competitive states has entered a new phase in which third states are being drawn into strategic interstate competition games through extraterritorial application. During this process, the incorporation of sanctions and countermeasures into the domestic legal systems of various countries has accelerated, giving rise to a structure that compels both states and corporations to choose between mutually incompatible institutional and economic spheres. Consequently, states and companies situated in between may face conflicting demands for compliance with competing regulatory frameworks that are difficult to square. However, for many states, including Japan, exclusive reliance on a single regulatory or economic sphere is not practically feasible, making it necessary to adopt measures aimed at reconciling compliance obligations across competing frameworks. At the level of private-sector actors, this requires mitigating risks arising from institutional competition through such approaches as incorporating risks into contractual arrangements in advance, strengthening due diligence with respect to business partners, and reviewing and restructuring supply chains. At the same time, governments must develop relevant legal and institutional frameworks and establish support mechanisms that facilitate and promote such private-sector responses.

Given the foregoing, states and businesses caught in the crossfire of competing powers will find it ever more crucial to pursuit economic security on the premise of coexistence among mutually incompatible institutional and economic spheres. In this context, merely responding passively to conflicting institutional demands is not sufficient. Rather, it is necessary to proactively address and overcome the structural constraints generated by institutional competition by enhancing institutional adaptability and maintaining operational flexibility.

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1. According to the law firm Stephenson Harwood, confirmed cases emerged in 2024 in which Chinese companies initiated litigation before Chinese domestic courts against European companies that had suspended payments in compliance with sanctions imposed by the US government. These proceedings advanced within the Chinese legal system and were ultimately resolved after the European companies resumed payments following the issuance of licenses by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC). Stephenson Harwood, China's First Use of Blocking Rules against U.S. Sanctions on Chinese Refineries, May 5, 2026, <https://www.stephensonharwood.com/insights/chinas-first-use-of-blocking-rules-against-us-sanctions-on-chinese-refineries/>.
2. Since March 2025, OFAC has designated Shandong Jincheng Petrochemical Group Co., Ltd., Hebei Xinhai Chemical Group Co., Ltd., Shandong Shengxing Chemical Co., Ltd., Shandong Shouguang Luqing Petrochemical Co., Ltd., and Hengli Petrochemical Refining Co., Ltd., as targets of the “Economic Fury” sanctions against Iran. These companies were subject to asset freezes and other measures, and transactions with them were prohibited. The rationale for the sanctions was that these China-based independent refiners play a crucial role in supporting Iran’s oil economy.
3. The Rules provide that, to counter what is regarded as the unjustified extraterritorial application of foreign laws and regulations, prohibition orders may be issued stating that such foreign measures are not be accepted, enforced, or complied with. The Rules further stipulate that domestic or foreign individuals and organizations that infringe upon the rights or interests of Chinese entities through compliance with foreign laws, regulations, or other measures may be held liable for damages.
4. Lingling Wei, “Beijing Deploys Long-Threatened Economic Arsenal Against U.S. Pressure,” The Wall Street Journal, May 5, 2026, < https://www.wsj.com/world/china/beijing-deploys-long-threatened-economic-arsenal-against-u-s-pressure-8052d9b4 >.
5. US Department of State, Secretary Rubio’s Press Briefing from the White House, May 5, 2026, <https://www.state.gov/releases/office-of-the-spokesperson/2026/05/secretary-of-state-marco-rubio-remarks-to-press-9/ >.
6. US Department of State, Secretary Rubio’s Press Briefing from the White House, May 5, 2026, < https://www.state.gov/releases/office-of-the-spokesperson/2026/05/secretary-of-state-marco-rubio-remarks-to-press-9/ >.
7. “FM spokesperson responds to Rubio’s threat to impose secondary sanctions if China ignores US sanctions against Iran,” Global Times, May 7, 2026.
8. 商务部新闻办公室, 商务部新闻发言人就将7家欧盟实体列入出口管制管控名单答记者问, April 24, 2026, <https://www.mofcom.gov.cn/syxwfb/art/2026/art_b5216a7d5c3a4b82bb67482c44b3be18.html>. The designated entities are Belgian firearms manufacturers Herstal and FN Browning, Germany’s Hensoldt AG, the Czech defense and aerospace company Omnipol, SpaceKnow, Excalibur Armory, and the Czech Aeronautical Research and Testing Institute. Excalibur Armory determined that it does not directly procure dual-use items from China and that the measure would not have a significant impact on its business. Shi Bu, Liz Lee, Ben Blanchard, and Jan Lopatka, “China bans dual-use item exports to seven European entities over Taiwan arms sales,” Reuters, Apr. 24, 2026.
9. MOFCOM spokesperson stated, “the Chinese side’s listing is strictly targeted at a small number of EU military-related entities which have either participated in arms sales to China’s Taiwan region or engaged in collusion with it” (Ministry of Commerce, People’s Republic of China, MOFCOM Spokesperson’s Remarks on Adding Seven EU Entities to the Restricted Namelist, Apr. 30, 2026, <https://english.mofcom.gov.cn/News/SpokesmansRemarks/art/2026/art_393371b908b543a690f8ff4ceaba8734.html>). However, some have argued that the Chinese government’s measures were adopted in retaliation for the EU’s implementation of its 20th sanctions package against Russia on April 23, 2026. This is because the package targeted 27 Chinese companies that were alleged to have assisted Russia and Belarus in evading Western sanctions or to have directly supplied drone components and other items necessary for waging war (Council Regulation (EU) 2026/469 of April 23, 2026 amending Regulation (EU, Euratom) 2020/2093 laying down the multiannual financial framework for the years 2021 to 2027). On April 25, MOFCOM expressed its “firm opposition” to the EU’s inclusion of Chinese companies in the 20th sanctions package against Russia and demanded their immediate removal from the list. In a statement, a spokesperson for MOFCOM said, “(this measure) runs counter to the spirit of the consensus reached between Chinese and EU leaders and seriously undermines mutual trust and the overall stability of bilateral relations.” The ministry warned that it would take “necessary measures” to protect Chinese companies, adding that “all consequences will be borne by the EU side” (Ziyi Tang and Ryan Woo, “China condemns EU’s inclusion of Chinese entities in sanctions package against Russia,” Reuters, Apr. 25, 2026).
10. According to MOFCOM, “Foreign organizations and individuals are prohibited from transferring or providing dual-use items originating from the People’s Republic of China to these companies. Furthermore, all ongoing related activities must be immediately suspended.” 商务部新闻办公室, 商务部新闻发言人就将7家欧盟实体列入出口管制管控名单答记者问, April 24, 2026, <https://www.mofcom.gov.cn/syxwfb/art/2026/art_b5216a7d5c3a4b82bb67482c44b3be18.html>.
11. MOFCOM indicated that China reserves the right to approve exports on a case-by-case basis under exceptional circumstances, stating that exporters of these two types of goods may apply to the Ministry if it is determined that exports to the relevant entities are “genuinely necessary.” 商务部新闻办公室, 商务部新闻发言人就将7家欧盟实体列入出口管制管控名单答记者问, April 24, 2026, <https://www.mofcom.gov.cn/syxwfb/art/2026/art_b5216a7d5c3a4b82bb67482c44b3be18.html>.
12. The White House, President Trump Gaggles with Press on Air Force One En Route to Anchorage, AK, May 15, 2026, <https://www.youtube.com/watch?v=XVfi6_wcx_8>. Although President Trump suggested that the US government might lift sanctions against Chinese oil refiners, it remains unclear what the US government demanded from China in exchange for lifting the sanctions. However, there are indications that the US government expects China to demonstrate alignment with US sanctions against Iran in exchange for the lifting of sanctions. US Trade Representative Jamieson Greer stated, the US has “a lot of confidence that [China] will do what they can to limit any kind of material support for Iran.” (“Greer: US, China Willing to Continue Trade Truce,” Bloomberg Television, May 15, 2026, <https://www.bloomberg.com/news/videos/2026-05-15/greer-us-china-willing-to-continue-trade-truce-video>).
13. “China’s Rare Sanctions Pushback Leaves Banks Caught in Crossfire,” Bloomberg, May 4, 2026, <https://www.bloomberg.com/news/articles/2026-05-04/china-s-rare-defiance-of-us-sanctions-sparks-showdown-over-banks-moqorgpw>. Some Chinese private refiners are reportedly showing a willingness to expand their use of low-cost crude oil supplied from Iran, Russia, and Venezuela while accepting the risk of US sanctions. This is generally attributed to the fact that China’s private small- and medium-sized refiners are less dependent on the US financial system than state-owned enterprises and have stronger ties to Chinese state-owned banks.
14. Stephenson Harwood, China's First Use of Blocking Rules against U.S. Sanctions on Chinese Refineries, May 5, 2026, <https://www.stephensonharwood.com/insights/chinas-first-use-of-blocking-rules-against-us-sanctions-on-chinese-refineries/>.