The Islamic Revolutionary Guard Corps now imposes a “toll” on ships crossing the Strait of Hormuz, charging their safety in renminbi or cryptocurrency. With the US disengagement from freedom of navigation, no other actor is stepping up to ensure global maritime security, paving the way for a lasting militarization of the passage. If this precedent catches on, the thirteen major maritime chokepoints that carry $10 trillion in annual trade could all become toll points. Leaders of the Revolutionary Guard have always had an eye for good business opportunities. From mobile operators to airports to national natural gas distribution, the commercial interests of the IRGC extend throughout the Iranian economy. Today, this ever-enterprising organization has found a profitable way to take advantage of the current war: reportedly, the IRGC now charges a “toll” to allow ships flying the flags of “friendly” countries to cross the Strait of Hormuz without incident. Ships that do not pay this toll remain at risk of drone or missile attacks.
Details are scarce; few international maritime leaders are rushing to admit they have paid this toll. But reports indicate the IRGC may be willing to allow ships flying the flags of countries such as China, Malaysia, India, and Pakistan, including those that have rushed to re-register and change flags. Ships are required to sail off the Iranian rule of Larak, after paying the IRGC a fee in renminbi or cryptocurrency. One ship reportedly paid the equivalent of $2 million USD to make the crossing.
“During the last week of March, only 24 merchant ships openly crossed the strait, compared to over 600 the last week of February before the war.”
The United States’ lack of commitment to guaranteeing the security of commercial navigation on major international waterways means there are no other candidates to take on the role of global maritime policeman. French President Emmanuel Macron and British Foreign Minister have made it clear they are not interested in this role. If the US does not demand that Iran abstain from threatening navigation as a condition for ending hostilities, this threat – and the toll imposed by Iran – will remain in effect even if Trump declares victory and ends bombings. And the longer the Iranian threat persists, the more desperate the world will need essential energy deliveries and other exports from the Gulf, and the more prices will rise—meaning maritime companies will pay this toll.
“Royal precedent: a global consequence”
Before the war, about 25 oil tankers per day, carrying an average of 20 million barrels of oil, left the Gulf bound for the rest of the world, mainly to Asia. If this $2 million toll is generalized, and if Iran also applies it to incoming ballast vessels, it will result in a $5 per barrel increase in the price of Gulf oil shipped from Hormuz. This globally equates to a $1 per barrel increase on major oil benchmark indices. And if this tax applies to all commercial vessels, not just tankers, it represents an additional $50 billion in revenue per year for the IRGC.
“In the short term, this perspective means the end of Dubai as a transshipment hub. It also strongly encourages Arabian Gulf energy producers to develop pipeline links to alternative export terminals outside the Persian Gulf.”
This could be relatively easy for Saudi Arabia, which already has an export terminal on the Red Sea, and for the UAE, which has one in the Gulf of Oman. This will be much more difficult and costly for Qatar, Kuwait, Bahrain, and Iraq. And of course, it also gives hydrocarbon importers, especially in Asia, an additional incentive to develop alternative energy supply sources.
“But what may be even more worrying is the precedent set by Iran’s toll. If Iran can defy the UN Convention on the Law of the Sea by refusing ‘innocent passage’ and imposing a toll on commercial vessels to cross the Strait of Hormuz, other governments and armed groups may follow suit. Why not charge transit through the Bab al-Mandab Strait? The Malacca Strait? The Gibraltar Strait? The Bosporus? The Channel? The Taiwan Strait?”
“According to a 2023 university study, up to three-quarters of global maritime trade value, around $10 trillion per year, passes through 13 major maritime chokepoints.”
If the idea of charging tolls gains momentum, this additional hiccup in the gears of international trade will be a major obstacle to global trade and economic growth.
