Global economy under threat as Iran ratifies 'toll' law for the Strait of Hormuz

The global economy now rests in the hands of Iran, which has erected a massive "wall" at the Strait of Hormuz. Recent developments are sending shockwaves through international markets: Iran has passed a law for the collection of tolls, effectively establishing full control over traffic in the planet's primary energy artery.

With the global economy in a state of "asphyxiation" and the supply of food and fuel hanging by a thread, Iran now wields absolute control over these waters to assert its own sovereignty. By institutionalizing a "life tax" and setting up a unique "customs house" under the supervision of the Revolutionary Guards, Iran is dealing a strategic blow to the US and Donald Trump, who had previously promised that the US Navy would escort tankers—a commitment that has yet to materialize.

The trap of Larak Island

Iran has quietly established a de facto safe shipping corridor north of Larak Island, off the coast of Bandar Abbas, where the Islamic Revolutionary Guard Corps (IRGC) and port authorities inspect every vessel before granting passage. Nearly all transits in the past three weeks have bypassed the usual route, moving instead through the narrow channel north of Larak near the Iranian coast, suggesting a "controlled access corridor based on permits," according to Windward. All 57 transits recorded since March 13 followed this detour, while almost none used the standard route. Vessels have also been observed forming queues north of Larak awaiting clearance, with several being turned away in recent days.

Iran passes toll collection bill

It is evident that Iran is permitting passage only to specific vessels, prioritizing countries with friendly relations or ships linked to its own trade. Furthermore, it is noteworthy that the Iranian parliament voted in favor of a bill to institutionalize toll collection from ships passing through the Strait, a move that cements Tehran’s economic grip on this key location. Among other provisions, the bill defines who is permitted to use the passage: the US, Israel, and states participating in anti-Iranian sanctions are now prohibited from transit. In the event of a violation, the Iranian military has threatened to strike with missiles.

The measure, which seeks the agreement of other regional countries, provides for the imposition of fees on transfers of energy, commodities, and food. At least two vessels have already paid a transit fee in Chinese yuan. In one instance, the transaction was facilitated through a Chinese shipping services company acting as an intermediary.

In practice, collection had already begun in mid-March, according to data from Lloyd’s List, involving approximately $2 million per transit. Tehran is now establishing the legal foundation for a new regime in the region, in cooperation with Oman. However, for countries friendly to Iran, "exceptions" can be made. Malaysia's Transport Minister, Anthony Loke Siew Fook, noted that his country's tankers are not charged due to strong diplomatic ties, according to Bloomberg. According to the Malaysian Ministry of Foreign Affairs, seven ships are already passing through the Strait unhindered.

How the new system operates

In more detail, the new system functions as follows: Ship managers first contact intermediaries linked to the IRGC and submit detailed information, such as IMO numbers, crew names, and final destinations. If approved, they receive a transit code and routing instructions. Upon entering Iranian waters, authorities request the code via radio; if valid, an Iranian vessel escorts the ship. Those not approved are rejected.

Despite the difficulty of identifying true ownership, most transits involve vessels with links to Iran, Greece, and China, while some from Pakistan and India also appear. Countries such as India, Pakistan, Iraq, Malaysia, and China have reportedly negotiated directly with Tehran. Indian tankers have secured safe passage without payment, while Chinese ships have transited through coordinated efforts. In one case, an Indian LPG vessel was escorted by Indian naval ships.

What international maritime law provides

From the perspective of international maritime law, the Strait of Hormuz falls under the "transit passage" regime of the UN Convention on the Law of the Sea (UNCLOS), which guarantees free passage for all ships, including military ones, and explicitly prohibits the imposition of fees, explains Ekaterina Orlova, head of legal practice at Grace Consulting Ltd.

"Article 38 of UNCLOS clarifies that coastal states can regulate navigation in straits only for reasons of safety, protection of the marine environment, and navigation, but not for economic gain through direct transit fees," she states. In practice, the close proximity of the territorial waters of two states claiming control imposes limitations, adds Stepan Guzei, a partner at the law firm Lidings. "For example, since the late 1980s, Oman has imposed restrictions on the passage of warships and submarines, which are implemented to some extent. A significant part of the defensive infrastructure around the strait is located on islands under Iranian jurisdiction," he reminds.

Legally, states have the capacity for control, but the issue is technical legitimacy. The Suez and Panama canals also charge fees, but they are artificial works, and the states managing them can set tolls. The Strait of Hormuz is a natural waterway and is subject to international law, not the legislation of coastal states, Orlova emphasizes. Examples show that attempts to impose an economic fee on natural straits often lead to diplomatic and legal conflicts, Orlova says, recalling the Iran-Gulf states dispute in the 1980s.

However, in practice, adherence to international rules is hampered by the fact that neither Iran nor the US has ratified UNCLOS, explains Igor Yushkov, an expert at the Financial University of Russia. This creates additional risks for the stability of the international order. Kremlin spokesperson Dmitry Peskov stated that the system of rules exists de jure, but de facto is not applied. Analysts agree that Tehran's plan is feasible and the transit fee will likely remain even after the situation stabilizes. "It is not ruled out that Oman might participate. By separating the entry and exit flows from the Persian Gulf, there could be a division of control: one side collecting a fee for transit in one direction, the other in the opposite," says Guzei. This will increase the cost of cargo and freight. Given the volume of resources passing through the strait, the impact will be significant. The US is already examining scenarios where the price of oil reaches $200 per barrel, Bloomberg reports.

The use of strategic reserves may temporarily contain prices, Yushkov notes, but it is not sustainable: reserves will be depleted and prices will continue to rise. The maximum target of $200 per barrel is unlikely to be maintained—the final balance is estimated at around $130–$140 per barrel, the expert predicts.

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