Iran advances tolls on Strait of Hormuz

In Short:
– Iran’s parliament is implementing transit fees for ships in the Strait of Hormuz to formalise an existing toll system.
– The legislation raises international concerns about legality and its impact on global supply chains and shipping costs.

Iran’s parliament is moving forward with legislation to implement transit fees for ships passing through the Strait of Hormuz. This formalizes an existing informal toll system in the key energy route.The plan is expected to be completed next week, as reported by the semi-official Fars news agency.

Iran proposes tolls

An unnamed lawmaker stated that the proposal aims to recognise Iran’s sovereignty and create revenue from fees charged to vessels. Tehran lawmaker Somayeh Rafiei noted that countries relying on the strait would have to pay these fees.

The legislation would formalize a system already enforced by Iran’s Islamic Revolutionary Guard Corps. Reports indicate that payments up to $2 million per voyage are being sought from commercial vessels for safe passage.

Lloyd’s List reported that all vessels have been using a corridor controlled by the IRGC since March 13, requiring clearance codes and escorts, with some transactions made in yuan. Approximately one-fifth of the world’s oil passes through this strait, which has faced significant disruptions since military actions began on February 28.

International concerns

Experts argue Iran’s toll plan lacks legal basis under international law. The United Nations Convention on the Law of the Sea ensures transit passage, and India’s government supports this interpretation.

Global supply chains are already feeling the impact, with some traders in Nepal increasing edible oil prices significantly. Shipping companies are raising freight charges by $1,500 to $2,000 per container, citing force majeure. Leaders in Europe have warned that such shipping interference poses a threat to international peace and security.