As the Strait of Hormuz gradually reopens, the coastal states of Iran and Oman have recently raised the possibility of establishing a permanent tolling mechanism, planning to levy transit fees on commercial vessels passing through this waterway. This potential policy adjustment for the Strait of Hormuz, the world's most critical oil and liquefied natural gas transport route, has prompted renewed scrutiny from the international commodities market and shipping industry regarding the global supply chain's high dependence on strategic waterways. It has also heightened concerns about the potential for fundamental changes to traditional global shipping rules.
It is disclosed that before the US and Israel previously waged war on Iran, which led Tehran to temporarily close the Strait of Hormuz, this natural passageway had never charged any fees to transiting vessels. Omani officials have recently made clear to European counterparts that shipping management in the strait cannot return to its pre-war state. Oman is currently spearheading research into the management and tolling models of other crucial global shipping chokepoints. Senior Geoeconomic Analyst Adam Farrar of Bloomberg Economics points out that the eventual tolling and management arrangements adopted for the Strait of Hormuz are likely to set a new precedent with profound global implications.
Regarding the legality of this tolling proposal, there are differing considerations within international legal circles and under existing multilateral conventions. According to fundamental principles of international law, foreign vessels enjoy the right of transit passage through straits used for international navigation, and coastal states cannot unilaterally impose taxes or fees solely for the exercise of this right. However, relevant rules also allow coastal states to charge corresponding cost-based fees for "specific services provided to vessels," such as safety and navigation. Among the strait's coastal states, Oman is a party to the United Nations Convention on the Law of the Sea (UNCLOS), while Iran is not a member of that convention. In contrast, artificially constructed waterways like the Suez Canal and the Panama Canal are legally framed as sovereign state infrastructure, granting their operators full and legitimate rights to charge fees.
The tolling developments in the Strait of Hormuz are triggering chain reactions among the world's major shipping chokepoints, introducing uncertainty into the control mechanisms of several strategic waterways:
Strait of Malacca: In April of this year, following Iran's effective closure of the Strait of Hormuz, Indonesian Finance Minister Purbaya Yudhi Sadewa once floated the possibility of imposing tolls on the Strait of Malacca, although the statement was quickly retracted. In early July, Indonesian President Prabowo Subianto met with Singaporean Prime Minister Lawrence Wong, with both sides reaffirming their commitment to bilateral cooperation under the UNCLOS to fully ensure the smooth flow and security of this vital shipping lane.
Bab el-Mandeb Strait: Located at the entrance to the Red Sea and connecting the Indian Ocean to the Suez Canal, the Bab el-Mandeb Strait previously handled about 15% of global seaborne trade. Since the Houthi rebels in Yemen began sustained attacks on commercial vessels in the Red Sea in late 2023, traffic through this waterway has declined significantly. Although no fees are currently required for passage through the Bab el-Mandeb Strait, the industry authority Lloyd's List previously reported that, against the backdrop of Iran's study of a tolling mechanism for the Strait of Hormuz, the Houthi forces controlling parts of Yemen are also evaluating feasible plans to charge transit fees on vessels using the Bab el-Mandeb Strait.
Shipping industry analysts note that a small number of critical global strategic waterways carry the vast majority of cross-border energy and commodity trade. If Iran and surrounding coastal states break the international convention of not charging for natural straits and instead enforce control and commercialize tolls, it would not only directly increase the operational costs of global shipping and supply chains but could also trigger a geopolitical re-pricing and sovereignty contest over vital maritime passages by global powers.