While both, Tehran and Washington, have agreed to facilitating the passage of shipments through Hormuz, there have been reports that Iran is charging a toll fees from the vessels.
Under the new ceasefire agreement, for next two weeks, safe passage through the Strait of Hormuz will be possible via coordination with Iran’s Armed Forces and with due consideration of technical limitations, Iran’s foreign minister Seyed Abbas Araghchi said in a statement.
According to few reports, $2 million per ship would be charged by the Iranian authorities. The Associated Press (AP) reported that Iran’s Parliament approved a draft bill on April 7 that would formalise the toll. And the revenue from Hormuz toll would be used to rebuild the country after the war.
News18 reported citing Iran’s Fars News Agency that Iran also proposed the toll fees clause to the US during the negotiations.
US President Donald Trump also hinted that there could be financial gains from the ceasefire. He added that Iran could start the reconstruction process and the US would help in the traffic buildup in Hormuz.
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“The United States of America will be helping with the traffic buildup in the Strait of Hormuz. There will be lots of positive action! Big money will be made. Iran can start the reconstruction process. We’ll be loading up with supplies of all kinds, and just “hangin’ around” in order to make sure that everything goes well. I feel confident that it will. Just like we are experiencing in the US, this could be the Golden Age of the Middle East!!!” Trump wrote on Truth Social.
However, there has been no official statement by any authority on the toll.
Is the $2 million Hormuz toll fees possible?
The $2 million fees per ship to pass through the Strait of Hormuz seems possible but with estimates. Iran is likely to not charge a steep upfront fees.
According to a report by JP Morgan, Iran is proposing to charge 100-130 vessels per day $2 million each, which would amount to $70-90 billion per year in revenues, if approved.
The report said that even if Iran only charged $2 million each to the 2,000 to 3,000 commercial vessels currently stranded in the Gulf (estimates differ), Iran would raise $4-6 billion dollars which matches or exceeds recent annual toll revenues for the major canals such as the Panama and Suez among others.
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Iran’s Islamic Revolutionary Guard Corps (IRGC) shut the Strait of Hormuz on March 2 and threatened that any ships passing through it would be attacked. This was in retaliation to the US-Israeli joint strikes launched on Iran on February 28, that killed its Supreme Leader Ayatollah Ali Khamenei and started the war.
The closing of Hormuz was not anticipated by the US or its allies and came as a shock that Tehran fought back, which was also admitted by US President Trump.
The strait is responsible for passage of over one-fifth of the global energy and oil shipments. It’s halt led to an energy crisis across the world as oil prices increased, and many countries scrambled to mitigate the issue.
Iran strategically kept the Strait of Hormuz shut and gradually started to allow shipments to pass through it for friendly nations such as India and China among others.
While the war has ravaged several key infrastructure in Iran, putting a toll on Strait of Hormuz would not have been possible when it started.
Bloomberg’s Middle East Economist Dina Esfandiary said, “Iran probably did not expect its Hormuz strategy to be this successful… the lesson Iran has learned from this war is that holding the global economy hostage is cheaper and easier than anticipated.”
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Is Iran’s toll on Strait of Hormuz illegal?
Till now, the waterway was considered as free international passage. However, after the war broke out, Iran has realised its strategic importance. On the other hand, concerns about its claims over Hormuz increased exponentially.
So, the question arises whether Iran’s toll over the Strait of Hormuz is legal or not. The United Nations Convention on the Law of the Sea (UNCLOS), an international treaty signed by various countries, outlines the passage of the ships through straits across the globe.
According to Article 42 of the UNCLOS, no charge may be levied upon foreign ships by reason only of their passage through the territorial sea. Charges may be levied upon a foreign ship passing through the territorial sea as payment only for specific services rendered to the ship.
According to Article 44, the states bordering straits shall not hamper transit passage and shall give appropriate publicity to any danger to navigation or overflight within or over the strait of which they have knowledge. There shall be no suspension of transit passage.
However, both the US and Iran have not ratified the treaty. So it leaves room for both the countries to claim control over the Strait of Hormuz.
