Earlier this week, Iran rejected a 15-point ceasefire proposal presented by the US and instead laid out five conditions to end the war, which was started by the US and Israel in late February. The official noted that these five conditions are in addition to the demands Tehran was making during negotiations with Washington, days before it was hit by a wave of missiles.
One of those conditions was the recognition of Iran’s sovereignty over the Strait of Hormuz, a condition that Tehran had never made before. According to a CNN report, the narrow waterway, which is responsible for transporting roughly a fifth of the world’s oil and liquefied natural gas (LNG), has now emerged as a potent weapon of the Islamic Republic. Tehran is now using this weapon to source potentially billions of dollars in revenue and create a pressure point on the global economy.
Iran to charge vessels to pass Strait of Hormuz?
Iran’s new Supreme Leader, Mojtaba Khamenei, in his first address, stressed that the leverage of blocking the Strait must be continued. The Islamic Republic is now hinting that this leverage of Hormuz can be formalised. The lawmakers are now considering introducing a bill that would require nations using the Strait of Hormuz for shipping fuel and goods to pay tolls.
Additionally, Mojtaba Khamenei’s adviser is suggesting a “new regime for the Strait of Hormuz” once the war ends. Reports suggest that under such a system, Tehran could impose restrictions on rival nations and effectively link access to one of the world’s most vital shipping routes to its broader geopolitical disputes.
How can Iran benefit from the Strait of Hormuz?
If the tolling system is implemented, Tehran could earn millions a day. According to the report, nearly 20 million barrels of crude oil and oil products are transferred through the Strait every day. If the Islamic Republic decides to proceed with its previously reported $2 million per-tanker fees, that would amount to $20 million per day or nearly $600 million per month from oil alone. And if LNG shipments are included, the figure is expected to be above $800 million per month.
The tolling system, once implemented, could also assert Tehran’s dominance, which would, as a result, potentially lower the attacks on the Islamic Republic. Following the war with the US and the closure of the Strait, Tehran has sent a subtle message to the world, which is its hold on one of the key waterways and what would happen if Tehran decides to close it.
Strait of Hormuz shut
Days after Tehran was attacked by Washington and Tel Aviv, the Islamic Revolutionary Guard Corps (IRGC) announced the closure of the Strait of Hormuz. The Islamic Republic has long threatened to close the arterial waterway in response to an attack; however, only a few expected it to act, or that the impact would turn out to be this severe on global trade. The extent of the disruption now seems to be influencing Tehran’s approach, with its latest demands indicating an attempt to turn this moment of leverage into a more sustained strategic advantage.
Amid Iranian attacks, shipping through the Strait has slowed to an almost complete standstill, a move that has sent global energy markets into turmoil and forced nations far beyond the Persian Gulf to take emergency measures to secure fuel supplies.
Hormuz strategy proven successful: Expert
Dina Esfandiary, Middle East lead at Bloomberg Economics, told CNN, “Iran has been a little taken aback by how successful its (Hormuz) strategy has been – by how cheap and how comparatively easy it is to hold the global economy hostage.” She added that one of the lessons that Tehran has learnt in this war is that it discovered a new leverage of Hormuz and is likely to use it again in the future.
US concerned about possible tolling system at Hormuz
Earlier on Friday, US Secretary of State Marco Rubio, in a meeting with the G7 leaders, warned that one of the immediate challenges after the war with Iran would be the country’s attempt to create a tolling system at Hormuz. Following the G7 meeting in France, Rubio said that not only is the tolling system illegal, but it is also unacceptable, adding that it is dangerous to the world. He noted that it’s important for the world to have a plan to confront it. Additionally, the G7 foreign ministers stressed that there is an “absolute necessity” to restore “safe and toll-free freedom of navigation.”
