How a 'Hormuz Toll' Could Support a Ceasefire
If Iran is willing to share the proceeds, it could legitimately charge a toll for vessels crossing the Strait of Hormuz.
By Esfandyar Batmanghelidj
Few aspects of the ongoing war have rankled the international community more than the fact that Iran is charging vessels a fee for safe passage through the Strait of Hormuz. Now, Iran has insisted that it will retain “control” of the strait even after the end of the war.
Understanding this demand requires precision about what is meant by “control.” After this war ends, Iran will still be able to threaten to commercial vessels passing through the Persian Gulf. The asymmetric capabilities it has used to project this threat—ballistic missiles, cruise missiles, naval mines, and aerial and naval drones—will remain. There is no credible military solution to eliminate these capabilities, especially considering that even sporadic success striking ships can shift the risk appetite of vessel owners and charterers.
But even if Iran retains the capacity to strike vessels in the Persian Gulf after the war ends, it will not be able to unilaterally impose a toll on maritime traffic passing through the Strait of Hormuz. This is because Iran can only credibly threaten vessels while a war is ongoing. Once a ceasefire is agreed, any decision to strike vessels would constitute a violation of the ceasefire, triggering renewed conflict. In this sense, Iran’s present control of the strait does not reflect its latent capability to strike vessels, but rather its willingness to absorb the costs associated with the retaliation for those strikes. Those costs remain enormous—it is precisely because of the destructive nature of this war that Iran continues to signal an openness to diplomacy.
The notion that Iran will continue to control physically the Strait of Hormuz after the war can be rejected on face. But as governments around the world seek a diplomatic solution to end this war, they should be careful not to reject the Iranian demand for a “Hormuz toll” outright. Iran’s insistence on continued control of the strait is a political condition for a ceasefire, one advanced in light of the bruising reality that Iran failed to deter unprecedented attacks and has at best managed to draw the United States and Israeli into an attritional war. If a ceasefire requires that both Iran and the United States find a way to claim victory in a war with no winners, accommodating political demands in creative ways is tremendously important. Here, the creation of a toll represents a possible technical provision for a deal, one that can help create political buy-in for a ceasefire and follow-on agreement among leaders in Tehran.
To understand the potential utility of a formal toll mechanism, it is important to note the existing precedent for such fees and the possibility that Iranian control of the strait could be non-exclusive, meaning the toll mechanism could include other regional countries.
Turkish Precedent
The Strait of Hormuz is just over 30 kilometers wide at its narrowest point, meaning that it straddles Iranian and Omani territorial waters. Under the United Nations Convention on the Law of the Sea (UNCLOS), the strait must remain open for international shipping. Specifically, Article 26 of the convention specifies that “no charge may be levied upon foreign ships by reason only of their passage through the territorial sea.” In this sense, an Iranian “tollbooth” on the Strait of Hormuz would be inconsistent with international law.
But Article 26 does note that “charges may be levied upon a foreign ship passing through the territorial sea as payment only for specific services rendered to the ship.” This clause has generally been interpreted to mean that countries can charge fees on vessels passing through its territorial waters for services related to navigational safety.
The notion that Iran will continue to control the Strait of Hormuz can be rejected on face. But as governments around the world seek a diplomatic solution to end this war, they should be careful not to reject the Iranian demand for a “Hormuz toll” outright.
Turkiye is one such country. Turkish authorities impose a fee, adjusted every July, for vessels passing between the Black Sea and the Mediterranean. Currently, the fee is just under $6 per net ton of cargo, meaning that a major container ship transiting the Bosporus is likely paying around $200,000 in fees. Turkiye earns around $200 million in such fees annually. The recent increase in fees was justified “in terms of supporting the sustainability of the public services” provided by Turkiye’s Directorate General for Maritime Affairs.
Notably, if an equivalent fee were applied to the much larger VLCC tankers that pass through the Strait of Hormuz, the revenue would total more than $500,000 per vessel. This charge is not orders of magnitude beyond what Iran is currently charging vessels for safe passage through the strait, indicating that commercial operators can reasonably absorb the cost of the proposed toll, even in peacetime.
Turkiye’s original imposition of fees was contested and if either Iran and Oman were to try to unilaterally adopt a similar model there would be significant pushback, especially from the other littoral states of the Persian Gulf. But the international community does accept Iran’s right to charge fees in a context broadly similar to maritime trade—global aviation.
Aviation Parallel
Iran has not ratified UNCLOS, but it is a party to a similar piece of international law, the Convention on International Civil Aviation, also known as the Chicago Convention. In line with this convention, Iran charges overflight fees from global airlines that use its airspace.
Importantly, much like UNCLOS, the Chicago Convention makes clear that charges cannot be levied on aircraft “in respect solely of the right of transit.” However, Article 15 of the convention does allow fees to offset to costs of critical services related to aviation safety, such as maintaining civilian radars to monitor weather, providing air traffic control to manage flight paths, and ensuring adequate emergency response services at airports.
Given the precedent set by the fees Turkiye charges for vessels passing through the Turkish Straits, and the precedent represented by the overflight fees Iran already charges in line with its provision of air traffic control, navigation and safety services, the Iranian demand to formalize a transit surcharge is neither inherently unreasonable or nefarious. The international community has long accepted Iran’s imposition of such fees for use of its airspace and has understood the need to maintain the safety and openness of Iranian airspace for the benefit of international travel and air freight.
Of course, the fact that Iran is able to charge overflight fees does not mean that it is in a position to impose such fees on vessels transiting the Strait of Hormuz. No regional country will agree to exclusive Iranian control over the strait, even if that control takes the bureaucratic form of a payment. To overcome resistance to their political demand, Iranian authorities must accept that the technical implementation of the toll mechanism will only be viable if it reflects a shared control over the strait.
Regional Diplomacy
The formalization of a kind of toll could contribute to the rehabilitation of regional diplomacy after the war. If Iran is to benefit financially from the passage of vessels through the strait, so too should Oman, whose territorial waters encompass the passage. Moreover, the other six countries who shores bound the Persian Gulf should also benefit—it is their trade that underpins the vessel traffic. In this respect, regionalization of a “Hormuz toll” is consistent with the creation of a more integrated region which shares responsibility for the security and safety of maritime trade.
Importantly, there already exists a body that could be repurposed to receive and use the toll revenue in a regional format. Established in 1978, the Regional Organization for the Protection of the Marine Environment (ROPME) is the only active regional body that includes all eight littoral states of the Persian Gulf. While mainly focused on environmental issues, rather than maritime safety, the organization has successfully coordinated regional responses to maritime emergencies, such as oil spills.
ROPME is long overdue revitalization, especially as climate pressures accelerate degradation of the Persian Gulf’s fragile ecosystems. In an analysis for the Bourse & Bazaar Foundation published last year, Javad Amin-Mansour and Mohammad Al-Saidi noted that “ROPME requires stronger technical capacity, enhanced decision-making structures, and sustained political and financial backing from its members.” The financial boost from a modest fee could revitalize this body, allow it to expand its remit to providing a wider range of environmental and safety-related services in the Persian Gulf and Gulf of Oman. Given the environmental impact of American attacks on Iranian naval ships and Iranian attacks on commercial vessels, the use of toll revenues to remediate the damage of war represents a genuine need.
Establishing a durable peace after this war will require creative thinking. All of the parties involved in the conflict will make political demands. Those demands should be viewed as openings, not dealbreakers, especially when they can be connected to potential technical provisions for a diplomatic agreement.
If the Iranian demand to maintain control of the Strait of Hormuz can be translated into a specific toll mechanism, which can in turn be regionalized and connected to the shared task of rebuilding in the wake of the war, it may prove a valuable opening to create a more integrated and equitable region.
Esfandyar Batmanghelidj is the Founder and CEO of the Bourse & Bazaar Foundation.
Section: (integrated-futures-initiative) Photo: Canva