Iran’s approach to the Strait of Hormuz is often framed in binary terms—either the waterway is kept open or closed. Increasingly, however, Iran appears to be pursuing a different strategy: not closing the strait but regulating its use. This strategy could be legally defensible. Working jointly with Oman, which shares jurisdiction over the Strait, Iran could argue that vessels transiting the strait should pay not for the right to pass, but for specific services rendered, such as navigational safety, vessel traffic management, security escorts, emergency response, and environmental protection. The key reference point is the United Nations Convention on the Law of the Sea (UNCLOS), the principal body of international law governing how ships navigate the world’s seas and oceans. UNCLOS draws a bright line between artificial canals and natural waterways. Operators of artificial canals such as the Suez Canal and the Panama Canal are entitled to levy transit tolls, because these are sovereign, man-made infrastructures. Natural international straits are governed differently. As a general rule, coastal states may not charge ships merely for exercising their right of passage. However, Article 26 of the UNCLOS explicitly permits coastal states to charge non-discriminatory fees for specific services rendered to ships. For e.g Turker charges almost $0.13 per barrel in Turkish straits, Denmark & Sweden too charge for similar services in the Danish strait. Even where a formal fee regime is absent, as in the Strait of Malacca, navigation safety and environmental protection are still supported via voluntary funding through the Aids to Navigation Fund. If Iran adopted a fee structure broadly comparable to that used in the Turkish Straits, a very large crude carrier (VLCC) could pay on the order of $260,000 for a round-trip transit. Applying the same schedule to a Q-Max LNG carrier could imply a charge of roughly $130,000, or about $0.02/MMBtu. A bilateral Iran-Oman transit authority which charges fees in USD should be palatable for US interests too. A transit authority that denominates fees in dollars does something almost no one in Washington would expect from Tehran: It actively reinforces petrodollar supremacy at the very moment when dollar-denominated energy trade faces its greatest geopolitical test in 50 years. Saudi Arabia has flirted with yuan oil sales. Russia has settled exports in rubles after its invasion of Ukraine. China has methodically built alternative settlement infrastructure. Washington’s role in the establishment of a transit authority would be as guarantor, in exchange for the dollar denomination and the petrodollar reinforcement it provides. The transit authority doesn’t just become a reparations mechanism but a regional security architecture. Iran stops being the arsonist and gains a financial stake in keeping the region stable—a raison d’être to behave properly. The GCC gets contractual certainty over its export routes. Washington gets petrodollar reinforcement dressed as a peace dividend. Beijing gets energy supply security even if it does not get yuan internationalization. Every one gets a win in the above proposed structure.
