The illogicality of charging tolls for passage through the Strait of Hormuz
Reports indicate that Iran has begun charging tolls on selected vessels transiting the Strait of Hormuz and is considering formalizing a broader toll system. While the legal framework governing such matters is complex, the history of postwar marine navigation reveals a persistent pattern in how states treat navigation through natural chokepoints. This pattern is also broadly consistent with the doctrine of transit passage under international maritime law, which limits the ability of coastal states to impede or condition navigation through such chokepoints. Accordingly, Iran’s initiative is difficult to reconcile with – and would represent a significant departure from – the dominant post-1945 practice governing navigation through natural international straits.
Natural straits are widespread and frequently fall within the territorial waters of sovereign states. Of these, there are six widely recognized non-circumventable natural chokepoints: the Strait of Hormuz (Iran and Oman), Strait of Malacca (Indonesia, Malaysia, and Singapore), Bab al-Mandab (Yemen, Djibouti, and Eritrea), Turkish Straits – Bosporus, the Sea of Marmara, and the Dardanelles (Turkey), Danish Straits – the Great Belt, Little Belt, and the Sound (Denmark and Sweden), and the Strait of Gibraltar (Spain, Morocco, and Gibraltar).
In those six passages, there is no established practice since 1945 of charging mandatory tolls for passage. Turkey charges fees for pilotage and tug services, which are formally linked to navigational assistance rather than to the right of transit itself. It is also worth noting that the Northern Sea Route – a patchwork of straits, open seas, and coastal waters but not a single, discrete maritime chokepoint – also has fees charged by Russia, but these are associated with managed navigation in extreme ice conditions, including icebreaking and routing services, rather than with transit through a natural chokepoint per se. Therefore, since the conclusion of World War II, there is no established practice of states imposing mandatory transit tolls for passage through natural international straits.
Where seafarers will encounter mandatory transit fees is artificial waterways such as the Panama Canal (Panama), Kiel Canal (Germany), and the Volga-Don Canal (Russia). In these cases, the fees are justified as a return on the substantial capital expenditure required to create an entirely new navigational route, as well as to cover ongoing operational and maintenance costs. These fees are fundamentally tied to the artificial nature of these waterways and the investments required to create and maintain them, and are necessarily absent in the case of a natural waterway. In other words, artificial waterways create new economic value by reducing distance and cost, whereas natural straits are pre-existing geographic features, and therefore do not provide a comparable basis for charging for mere passage.
In the case of the Strait of Hormuz, one justification Iran has advanced for charging tolls is the provision of security services, i.e., ensuring safe passage. As explained above, while fees for optional services such as pilotage or navigation assistance are well established, there is no comparable precedent for charging vessels for passage itself through a natural waterway. Even setting that aside, it is notable that since the turn of the 21st century, a substantial share of the security risks faced by commercial vessels over recent decades has originated from Iran or Iran-aligned actors. This perspective is reinforced by the fact that the only country to explicitly threaten to impede or close the Strait to commercial traffic since at least 2000 is Iran, and it has articulated that threat on numerous occasions. Looking further back to 1945, the only other source of attacks is Iraq: during the Iran-Iraq War (1980-88), the Arab state was an explicit antagonist and active contributor to the “Tanker Wars” that plagued the Arabian Gulf. Otherwise, commercial vessels have generally been able to traverse the Strait without persistent disruption, and this is reflected in the generally low levels of insurance premia charged by global underwriters throughout the last 80 years.
Accordingly, the fees that Iran is looking to charge are based on a need that is, to a significant extent, endogenous to a security environment in which Iran plays a central role, in contrast to the ice-breaking fees that Russia charges in the Northern Sea Route or the voluntary tugging fees that Turkey charges in the Bosporus. The international community’s logical response to Iran’s proposed security services would be for it to reduce the underlying sources of risk that give rise to the demand for such security services as opposed to offering a costly solution to them. If such a precedent were to be accepted, it would open the door to similar charges at other critical chokepoints, fundamentally altering the economics of global maritime trade.
There exists a specialized legal lens for analyzing transits through the Strait of Hormuz and it lies beyond the scope of this short article. However, using the simple economic and historical lens presented above, there is no meaningful economic or historical basis for the imposition of mandatory transit fees in a natural chokepoint such as the Strait of Hormuz.
Omar Al-Ubaydli, Director of Studies and Research
