Iran's proposal to collect toll in Strait of Hormuz violates trade norms

Frankfurt, Apr 9 (AP) To end the war with the United States and Israel, Iran is demanding the right to collect tolls in the Strait of Hormuz as a precondition for reopening the waterway vital to world oil supplies.

Yet, collecting tolls in the strait would violate a basic and enduring principle of international maritime trade: freedom of peaceful navigation. It’s an ancient idea that was codified by the United Nations’ Convention on the Law of the Sea, which took effect in 1994.

Opening the strait would save the global economy from supply constraints that have pushed energy and fertiliser prices sharply higher since the war began on February 28.

But agreeing to Iranian toll-collecting would cement the Islamic Republic’s control over the strait

through which 20 per cent of the world’s oil is shipped – and enrich the country against whom the war was launched.

US President Donald Trump has made reopening the strait a priority. But the White House said Wednesday he is opposed to tolls, and analysts say the Gulf’s oil producers are, too.

Analysts say they have seen no change in traffic through the strait since the ceasefire was announced, despite claims to the contrary from the White House.

Here are things to know about Iran’s proposal and the international law with which it collides.

Iran already began charging vessels passing through strait ————————————————————– After the US and Israel launched the war, Iran immediately exercised leverage by blocking the strait with attacks – and threats of attacks – on ships, making passage too risky.

The disruption caused immediate shortages in some Asian countries highly dependent on the region’s energy, sent gasoline prices higher in the US and Europe, and threatened global economic growth.

Iran then began vetting vessels in a murky scheme dubbed the “tollbooth” by shipping analysts.

The ships were told to divert from the middle of the strait in Iranian and Omani territorial waters and instead detour around Iran’s Larak Island.

After delivering detailed information on crew and cargo to intermediaries of Iran’s paramilitary Islamic Revolutionary Guards Corps, some vessels were allowed to proceed – and at least two reportedly paid the equivalent of USD 2 million in Chinese yuan.

The Law of the Sea Treaty guarantees passage to peaceful ships ——————————————————————— Iran’s 10-point proposal for ending the war includes a provision allowing it and Oman to charge ships passing through the Strait of Hormuz, according to a regional official who spoke on condition of anonymity to discuss negotiations they were directly involved in. The official said Iran would use the money it raised for reconstruction.

But the Law of the Sea Treaty’s Article 17 guarantees a right of “innocent passage” for ships that do not threaten the coastal states. So allowing Iran and Oman to start charging for passage through the strait would set a dangerous precedent, experts said.

Freedom of navigation in the world’s seas has been a fundamental right for hundreds of years, founded on “the idea that the sea doesn’t belong to anyone”, Philippe Delebecque, a professor and maritime law expert at Paris’ Sorbonne University, said.

“Freedom of navigation has always been recognised, including specifically in straits,” he said. The concern is if the Strait of Hormuz could be closed, then why not the Strait of Gibraltar between the Mediterranean and the Atlantic, or the Strait of Malacca off Indonesia?” He called that scenario “the end of an international society”.

Neither Iran or US ratified Law of the Sea Treaty ————————————————— While 172 countries have ratified the UN convention, Iran and the United States are among those that have not.

“Not having ratified the convention doesn’t give (Iran) total freedom of action in the Strait of Hormuz,” Julien Raynaut, who heads the French Association of Maritime Law, a trade group, said.

“It remains subject to international law and notably this customary right of passage.” An Iranian tollbooth could lead China to conclude that it could restrict movement in the Taiwan Strait, Raynaut said.

Oman and Iran may face diplomatic pushback to adhere to the convention, said Constantinos Yiallourides, a senior research fellow at the British Institute of International and Comparative Law.

Free passage “is in the interest of everyone,” he said. “We all want to get the best products at the best prices.” Global economy needs Strait of Hormuz reopened ——————————————————- Some economists say that, from a strictly financial standpoint, the world would barely notice the additional costs from any tolling in the Strait of Hormuz.

For example, a USD 2 million toll on a large tanker carrying 2 million barrels of oil amounts to USD 1-per-barrel increase on that ship’s oil.

“The burden does not fall on global consumers, but overwhelmingly on the Gulf states that supply the oil that transits the strait,” wrote the Bruegel think tank in Brussels.

It said the world economy would instantly benefit from the opening of the strait – returning 20 per cent of the world’s oil to the market and sending prices lower.

Plus, by lowering oil prices, it would eliminate a multibillion-dollar geopolitical windfall for Russia, whose oil is suddenly in greater demand despite sanctions. (AP) ARI