Post by : Badri Ariffin

Iran is set to propose transit fees for vessels navigating the Strait of Hormuz, claiming it could yield up to $40 billion (approximately Rs 3.77 lakh crore) yearly.

Tehran seeks to enforce charges on commercial ships utilizing the strategic route, citing the need to cover services like security, environmental safeguards, and safety measures while they traverse the Strait. This plan has reportedly been shared with Gulf nations and China following the recent agreement between the US and Iran, which reinstated access to the Strait.

Additionally, Iran suggests that other Gulf states be included in this initiative and receive a portion of the revenue accrued from tolls on maritime traffic.

Significance of the Strait as a Trade Route

The Strait of Hormuz serves as a crucial maritime link, with almost one-fifth of global oil transportation occurring through it daily. Implementation of new transit fees could lead to increased shipping costs, affecting global trade efficiency.

A report from the WSJ indicated that approximately 70 vessels transited the Strait of Hormuz on Wednesday, marking the highest daily traffic since conflicts intensified, whereas routine operations averaged around 130 oil tankers daily before.

Shift in Management Approach

During a visit to Oman, Iran's chief negotiator Mohammad Bagher Ghalibaf conveyed that the management practices concerning the Strait have undergone irreversible changes. He asserted, "Everyone must recognize that the management of the strait will no longer revert to its former state."

US Responds Negatively to Iran's Proposal

The US Secretary of State Marco Rubio condemned Iran's proposal, emphasizing that no nation has the authority to impose fees on international waters.

Rubio cautioned that permitting such charges would set a perilous precedent globally, stating, "No country in the world has the right to assess fees for using international waterways, and that will never be part of any acceptable agreement." He added that if Iran were to succeed, other nations might follow suit on significant maritime routes worldwide.

He elaborated that accepting transit fees would inevitably lead to chaos, as "international waterways do not belong to any nation-state; this principle is fundamental to maintaining order globally."

Opposition from Gulf States and Oman

Rubio confirmed that Gulf nations, including Oman, who co-manage the Strait of Hormuz with Iran, oppose the proposed transit fees. Oman firmly advocates for maintaining the waterway as freely navigable without additional charges.

According to Rubio, "Ultimately, there will not be any fees or tolls. Oman made it clear in today's meeting that they are against the toll system." Oman’s Foreign Minister Badr Albusaidi reinforced this view, asserting that any potential future agreements regarding the Strait would exclude transit fees.

Context of the Proposal After US-Iran Agreement

The idea follows the recent 60-day agreement between the US and Iran which resolved hostilities and permitted the reopening of the Strait for international shipping.

Iran argues its initiative is akin to the regulation of the Dardanelles by Turkey, an essential international passage between the Black Sea and the Mediterranean, which allowed it to charge ships under the Montreux Convention for services such as lighthouses and sanitation. Iran maintains its plan similarly seeks to enforce fees for security and environmental protection while navigating the Strait of Hormuz.

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