When Iranian officials released a list of demands this week to end the war started by the United States and Israel, they added an item previously not on Tehran’s list: recognition of Iran’s sovereignty over the Strait of Hormuz.
The narrow waterway, through which a fifth of the world’s oil and liquefied natural gas (LNG) typically passes, has emerged as the Islamic Republic’s most powerful weapon. Now, it is poised to become both a potential source of billions of dollars in annual revenue and a pressure point on the global economy.
Iran has long threatened to close the strait in the event of an attack, but few expected it would be carried out or that it would prove so effective at disrupting global trade flows. The scale of the impact appears to be expanding the Iranian government’s ambitions, and the new demands suggest it is seeking to make its influence more durable.
Iran’s attack has brought shipping through the chokepoint to a near standstill, throwing global energy markets into turmoil and forcing countries far beyond the Persian Gulf to take emergency measures to secure fuel supplies.
“Iran is a little surprised at how successful its (Hormuz) strategy has been and how cheap and relatively easy it was to hold the global economy hostage,” said Dina Esfandiary, Middle East head at Bloomberg Economics. “One of the lessons learned in the war is that America has discovered this new influence and is likely to continue to use it. And I think monetizing it is part of discovering that we have this influence.”
Washington is keenly aware of the risks. US Secretary of State Marco Rubio warned on Friday that one of the most pressing post-war challenges is Iran’s attempt to establish a toll collection system in Hormuz.
“This is not only illegal, it’s unacceptable, it’s dangerous to the world, and it’s important that the world has a plan to confront it,” Rubio said after the G7 meeting in France. The group’s foreign ministers stressed that restoring “safe and free freedom of navigation” was “absolutely necessary”.
Nodding to the Strait of Hormuz’s growing strategic importance, Mojtaba Khamenei said in what was believed to be his first speech as Iran’s new supreme leader that “we must continue to use” the leverage of blocking the waterway.
In previous talks with the United States, Iran has sought sanctions relief and recognition of its rights to peaceful nuclear technology, but not control of the Strait of Hormuz.
Iran has now indicated that this influence may be formally introduced. Iranian lawmakers are considering a bill that would require countries that use the strait to pay tolls to transport fuel and goods, while an adviser to the supreme leader speaks of a “new regime for the Strait of Hormuz” after the war. The new system will allow the Iranian government to impose maritime restrictions on adversaries, effectively linking access to one of the world’s most important shipping lanes to geopolitical conflicts.
“Charging transit fees is a violation of transit navigation rules,” said James Kraska, a professor of international maritime law at the U.S. Naval War College. He added that under international law there is no legal basis for coastal states to charge tolls in international straits like Hormuz.
“The Strait of Hormuz is a strait used for international navigation and the territorial waters of Iran and Oman overlap… Iranian and Omani laws apply in these waters,” he said. “However, because this strait is an international strait, the right of passage applies to all states, allowing unimpeded water, air, and underwater passage.”
These rules are set out in the United Nations Convention on the Law of the Sea (UNCLOS). Although neither Iran nor the United States are parties to the treaty, many of its core principles are widely accepted as customary international law and therefore still apply, Kraska said. However, he added that Iran may still try to use its non-member status to strengthen its claims.
There is little precedent for states successfully charging tolls across international straits. In the 19th century, Denmark imposed a toll to cross the Denmark Strait, but after protests from several states it agreed to the 1857 Treaty of Copenhagen, permanently abolishing the so-called Sound Dew, he said.
That hasn’t stopped Iran from exploring what such a system would look like and how lucrative it could be.
Experts have questioned whether Iran will be able to establish an internationally acceptable toll system, but CNN estimates that if it does, revenues could rival Egypt’s Suez Canal.
Typically, approximately 20 million barrels of crude oil and petroleum products pass through the Strait of Hormuz every day. This roughly equates to about 10 so-called very large crude carriers (VLCCs). The reported rate is $2 million per tanker, which equates to about $20 million per day for oil alone, or about $600 million per month.
Including LNG shipments, that amount could rise to more than $800 million a month, equivalent to about 15-20% of Iran’s monthly oil export revenues in 2024.
For comparison, Egypt typically earns between $700 million and $800 million a month from the Suez Canal, a government-controlled man-made waterway, but turmoil in the Red Sea has sharply reduced that revenue over the past year.
Hormuz’s monetization could also be driven by Iranian economic pressure. Esfandiary said the Iranian government sees tolls as a way to “compensate for some of the economic shortfalls” under sanctions, describing it as a relatively “simple” and “low-cost” mechanism to compensate for limited access to global markets. Iran is one of the most heavily sanctioned countries in the world, second only to Russia.
Iran has repeatedly said the Strait of Hormuz remains open, but not unconditionally. Officials said “non-hostile” ships could be allowed to pass, subject to coordination with Iranian authorities. According to Reuters, the Ministry of Foreign Affairs informed the United Nations Security Council and the International Maritime Organization of its position in a letter.
At the same time, Tehran appears to be testing what a controlled passage system would look like in practice. Ship tracking data shows some tankers taking routes closer to Iran’s coast, and there are reports that some operators may have paid for safe passage.
No country, importer or ship operator has publicly acknowledged paying the fees, and the details of the arrangement remain unclear. But shipping information firm Lloyd’s List reported on Monday that more than 20 ships are using what it calls a new corridor through the strait, and that at least two vessels are understood to cost Lloyd’s, one of which is reportedly around $2 million.
Iran’s Islamic Revolutionary Guard Corps has also established an approved vessel registration system, and some governments are working directly with Tehran to secure tanker shipments, Lloyd’s List reported.
“These things are happening, and I think they’re going to happen more often if we don’t see some progress in the negotiations,” Richard Mead, editor-in-chief of Lloyd’s List, told CNN. “But as we speak now, the shipping industry is effectively paralyzed.”
