Recently, an Iranian official listed demands to end the ongoing conflict sparked by the U.S. and Israel. Among these was a new request: acknowledgment of Iran’s control over the Strait of Hormuz.
The Strait is critical, with about 20% of the world’s oil and liquefied natural gas passing through it. Iran sees this strategic location as a potential source of revenue and global influence.
While Iran has long threatened to shut down the strait during conflicts, the effectiveness of previous disruptions took many by surprise. This leverage seems to have inspired Tehran to enhance its demands, aiming for a more lasting impact on the global economy.
The situation in the Strait has worsened with Iranian attacks, disrupting shipping routes and causing energy markets worldwide to react. Many countries are scrambling to secure fuel in response.
Dina Esfandiary, a Middle East expert at Bloomberg Economics, noted, “Iran is realizing how successful and low-cost it is to hold the global economy hostage.” This shift in strategy may pave the way for Iran to monetize its control over the strait.
The U.S. is taking the threat seriously. Secretary of State Marco Rubio stated that one immediate concern following the conflict will be Iran’s possible plans to implement a tolling system in Hormuz. He emphasized that this idea is not just illegal but also dangerous and called for a global strategy to prevent it.
Interestingly, this tactic was not on Iran’s radar in past negotiations with the U.S., where their focus was on sanctions relief and the right to peaceful nuclear technology.
Now, Iran seems intent on formalizing its ability to impose limitations on the Strait of Hormuz. This includes a proposed bill that would require ships passing through to pay tolls, essentially linking access to geopolitical issues. An adviser to the supreme leader hinted at the potential for a new framework governing the strait.
James Kraska, a maritime law expert, remarked that charging for passage in the Hormuz Strait would violate international law. Under the UN Convention on the Law of the Sea, all nations have unimpeded access to international straits, something Iran is likely using to bolster its claims.
Historically, there are few examples of countries successfully taxing international waters. Denmark once did so in the 19th century, but after considerable backlash, it abolished those charges.
If Iran were to move forward with tolls, revenues could be substantial. Experts believe they might rival Egypt’s earnings from the Suez Canal. Approximately 20 million barrels of crude oil and oil products transit the Strait daily, potentially generating hundreds of millions in fee revenues.
Iran’s pursuit of this revenue stems from its difficult economic situation, worsened by ongoing sanctions. Esfandiary suggests Iran views tolls as a straightforward way to make up for restricted access to global markets, especially since it faces some of the toughest sanctions globally.
Despite its demands, Iran has stated that the Strait remains open for “non-hostile” vessels, conditional on coordination with local authorities. On the ground, it seems Iran is testing this control by requiring some vessels to reroute closer to its shores. Reports suggest that shipping firms may be paying for these safe passages, with estimates of fees around $2 million per tanker.
Richard Meade, editor of Lloyd’s List, warns that if negotiations stall, more ships may be forced to comply with Iran’s emerging tolling system. The current state of shipping is described as paralyzed, with uncertainty looming over future transit routes.
As this situation develops, the implications for global trade and energy markets could be profound. Monitoring Iran’s next steps in the Strait of Hormuz will be crucial for all nations relying on this vital maritime corridor.
