Iran formalises Hormuz ship approvals and transit tolls

• Iran tightens grip on Hormuz
• Tehran imposes Strait transit tolls
• Shipowners fear checkpoint regime

Iran has established a government agency to approve ship transits and collect tolls from vessels passing through the Strait of Hormuz.

The Persian Gulf Strait Authority (PGSA) will seek to administer movements through the chokepoint that carries 20 percent of global oil trade.

Presented by Tehran as a regulatory authority, the PGSA has circulated an email application procedure requiring vessels to disclose ownership, insurance, crew manifests and intended routes.

Iranian state broadcaster IRIB said the transit “mechanism” must be used to “obtain authorisation for passage” through the waterway.

The proposal formalises what the shipping industry has described as a “Tehran toll booth” – an Iranian-controlled corridor through Hormuz in which vessels are vetted before being granted passage.

According to shipping news outlet Lloyd’s List, vessels have paid up to $2 million to obtain transit approval, with tolls being settled using Chinese yuan. Iran has not publicly disclosed a formal tariff structure or payment mechanism.

The PGSA announcement has alarmed shipowners and insurers.

Speaking on a webinar, Richard Meade, editor-in-chief of Lloyd’s List, said Iran had positioned the PGSA “as the only valid authority to grant permission to ships transiting the straits”.

“We asked them for details and they sent us an application form so that we could get our ship approved,” Meade said. “We would be required to submit detailed records of our ownership, insurance, crew details and intended transit route.”

Iran signed but has never ratified the United Nations Convention on the Law of the Sea which came into force in 1994 and grants ships the right of transit through international straits.

Meade said the industry was concerned about “what kind of freedom of navigation is going to be left in place” under any reopening arrangement.

Arsenio Longo, founder of maritime intelligence firm HUAX, said the significance of the Iranian initiative lay in the “institutionalisation” of a new traffic control regime through Hormuz.

Over recent weeks some vessels moving through the strait had embedded ownership, cargo and routing information into destination fields to signal compliance.

Longo said the PGSA would formalise this wartime behaviour.

Describing the information being requested as “geopolitical vetting”, he said: “Iran is not only saying ‘pay us’. It is trying to create a traffic regime. That turns Hormuz from a passage into a checkpoint.”

Cichen Shen, Asia-Pacific editor for Lloyd’s List, said there was a gap between how Iran and the industry interpreted the reopening of the strait.

“We think it should be a return to the pre-war conditions when it comes to opening the strait – free transit,” Shen said. “But Tehran obviously begs to differ.”

“The Iranian authorities have said on various occasions that the strait is open, but under ‘my watch and under my control’ – and it’s a paid transit now.”

The emergence of a formalised approval system also raises sanctions concerns.

Guidance issued in April by the US Treasury’s Office of Foreign Assets Control warned that payments made to Iran in exchange for safe passage could expose non-US firms to secondary sanctions.

The PGSA’s creation also intensifies concerns around Iranian maritime control zones.

Further reading:

• Fujairah and Khor Fakkan: trade lifeline on UAE’s east coast
• Chabahar fails as ‘Hormuz workaround’ for India and China
• Neil Quilliam: The digital chokepoint beneath Hormuz

On Monday Iran announced a “control area” stretching from the Gulf of Oman into the Gulf itself.

The zones appear to extend into commercially sensitive waters. One boundary reportedly runs from Mount Mobarak in Iran to Fujairah in the UAE, while another extends from western Qeshm Island towards Umm Al Quwain, another smaller emirate which is part of the UAE.

Washington and Tehran are this week negotiating a ceasefire and Hormuz reopening framework.

Longo said the proposed maritime zones should be viewed as diplomatic “bargaining with operational consequences”.

“The zones as described appear to reach into waters associated with UAE and Omani sovereignty,” he said.

“But Iran does not need recognition to create pressure. Iran needs compliance. If vessels delay, reroute, seek approval, or insurers price the area differently, then the zone has already started to shape behaviour.”