Iran’s proposal to collect tolls in the Strait of Hormuz violates trade norms

To end the war with the Unit­ed States and Is­rael, Iran is de­mand­ing the right to col­lect tolls in the Strait of Hor­muz as a pre­con­di­tion for re­open­ing the wa­ter­way vi­tal to world oil sup­plies.

Yet col­lect­ing tolls in the strait would vi­o­late a ba­sic and en­dur­ing prin­ci­ple of in­ter­na­tion­al mar­itime trade: free­dom of peace­ful nav­i­ga­tion. It’s an an­cient idea that was cod­i­fied by the Unit­ed Na­tions’ Con­ven­tion on the Law of the Sea, which took ef­fect in 1994.

Open­ing the strait would save the glob­al econ­o­my from sup­ply con­straints that have pushed en­er­gy and fer­til­iz­er prices sharply high­er since the war be­gan on Feb. 28. But agree­ing to Iran­ian toll-col­lect­ing would ce­ment the Is­lam­ic Re­pub­lic’s con­trol over the strait through which 20% of the world’s oil is shipped — and en­rich the coun­try against whom the war was launched.

U.S. Pres­i­dent Don­ald Trump has made re­open­ing the strait a pri­or­i­ty. But the White House said Wednes­day he is op­posed to tolls, and an­a­lysts say the Gulf’s oil pro­duc­ers are, too.

An­a­lysts say they have seen no change in traf­fic through the strait since the cease­fire was an­nounced, de­spite claims to the con­trary from the White House.

Here are things to know about Iran’s pro­pos­al and the in­ter­na­tion­al law with which it col­lides.

Iran had al­ready be­gun charg­ing ves­sels pass­ing through the strait

Af­ter the U.S. and Is­rael launched the war, Iran im­me­di­ate­ly ex­er­cised lever­age by block­ing the strait with at­tacks — and threats of at­tacks — on ships, mak­ing pas­sage too risky. The dis­rup­tion caused im­me­di­ate short­ages in some Asian coun­tries high­ly de­pen­dent on the re­gion’s en­er­gy, sent gaso­line prices high­er in the U.S. and Eu­rope, and threat­ened glob­al eco­nom­ic growth.

Iran then be­gan vet­ting ves­sels in a murky scheme dubbed the “toll­booth” by ship­ping an­a­lysts.

The ships were told to di­vert from the mid­dle of the strait in Iran­ian and Omani ter­ri­to­r­i­al wa­ters and in­stead de­tour around Iran’s Larak Is­land. Af­ter de­liv­er­ing de­tailed in­for­ma­tion on crew and car­go to in­ter­me­di­aries of Iran’s para­mil­i­tary Is­lam­ic Rev­o­lu­tion­ary Guards Corps, some ves­sels were al­lowed to pro­ceed — and at least two re­port­ed­ly paid the equiv­a­lent of $2 mil­lion in Chi­nese yuan.

The Law of the Sea Treaty guar­an­tees pas­sage to peace­ful ships

Iran’s 10-point pro­pos­al for end­ing the war in­cludes a pro­vi­sion al­low­ing it and Oman to charge ships pass­ing through the Strait of Hor­muz, ac­cord­ing to a re­gion­al of­fi­cial who spoke on con­di­tion of anonymi­ty to dis­cuss ne­go­ti­a­tions they were di­rect­ly in­volved in. The of­fi­cial said Iran would use the mon­ey it raised for re­con­struc­tion.

But the Law of the Sea Treaty’s Ar­ti­cle 17 guar­an­tees a right of “in­no­cent pas­sage” for ships that do not threat­en the coastal states. So al­low­ing Iran and Oman to start charg­ing for pas­sage through the strait would set a dan­ger­ous prece­dent, ex­perts said.

Free­dom of nav­i­ga­tion in the world’s seas has been a fun­da­men­tal right for hun­dreds of years, found­ed on “the idea that the sea doesn’t be­long to any­one,” said Philippe Dele­becque, a pro­fes­sor and mar­itime law ex­pert at Paris’ Sor­bonne Uni­ver­si­ty.

“Free­dom of nav­i­ga­tion has al­ways been rec­og­nized, in­clud­ing specif­i­cal­ly in straits,” he said. The con­cern is if the Strait of Hor­muz could be closed, then why not the Strait of Gibral­tar be­tween the Mediter­ranean and the At­lantic, or the Strait of Malac­ca off In­done­sia?

He called that sce­nario “the end of an in­ter­na­tion­al so­ci­ety.”

Nei­ther Iran or the U.S. have rat­i­fied the Law of the Sea Treaty

While 172 coun­tries have rat­i­fied the U.N. con­ven­tion, Iran and the Unit­ed States are among those that have not.

“Not hav­ing rat­i­fied the con­ven­tion doesn’t give (Iran) to­tal free­dom of ac­tion in the Strait of Hor­muz,” said Julien Ray­naut, who heads the French As­so­ci­a­tion of Mar­itime Law, a trade group. “It re­mains sub­ject to in­ter­na­tion­al law and no­tably this cus­tom­ary right of pas­sage.”

An Iran­ian toll­booth could lead Chi­na to con­clude that it could re­strict move­ment in the Tai­wan Strait, Ray­naut said.

Oman and Iran may face diplo­mat­ic push­back to ad­here to the con­ven­tion, said Con­stan­ti­nos Yial­lourides, a se­nior re­search fel­low at the British In­sti­tute of In­ter­na­tion­al and Com­par­a­tive Law.

Free pas­sage “is in the in­ter­est of every­one,” he said. “We all want to get the best prod­ucts at the best prices.”

The glob­al econ­o­my needs the Strait of Hor­muz re­opened

Some econ­o­mists say that, from a strict­ly fi­nan­cial stand­point, the world would bare­ly no­tice the ad­di­tion­al costs from any tolling in the Strait of Hor­muz.

For ex­am­ple, a $2 mil­lion toll on a large tanker car­ry­ing 2 mil­lion bar­rels of oil amounts to $1-per-bar­rel in­crease on that ship’s oil.

“The bur­den does not fall on glob­al con­sumers, but over­whelm­ing­ly on the Gulf states that sup­ply the oil that tran­sits the strait,” wrote the Bruegel think tank in Brus­sels. It said the world econ­o­my would in­stant­ly ben­e­fit from the re­open­ing the strait — re­turn­ing 20% of the world’s oil to the mar­ket and send­ing prices low­er.

Plus, by low­er­ing oil prices, it would elim­i­nate a multi­bil­lion-dol­lar geopo­lit­i­cal wind­fall for Rus­sia, whose oil is sud­den­ly in greater de­mand de­spite sanc­tions.

The in­ter­na­tion­al price of oil has jumped from around $72 per bar­rel be­fore the war to as high as $118 on March 31. On Mon­day, Brent crude, the in­ter­na­tion­al bench­mark, trad­ed at $94.55, down sharply af­ter news of the two-week cease­fire.

The Gulf’s oil pro­duc­ers are leery of Iran­ian con­trol of the strait

Sau­di Ara­bia, the biggest Gulf pro­duc­er, wel­comed the cease­fire deal be­tween the U.S. and Iran but called for keep­ing the Strait of Hor­muz open “with­out any re­stric­tions.”

Gulf coun­tries have had to shut down some 12 mil­lion bar­rels per day in crude pro­duc­tion be­cause there’s no vi­able way around the strait for much of their oil. The two pipelines that by­pass it aren’t big enough to make up for all of the lost oil, and build­ing new pipelines would take years.

Giv­en the down­sides of the toll­booth pro­pos­al, the Gulf states would on­ly agree to it if all oth­er op­tions looked much worse, Bruegel said.

A ma­jor ob­jec­tion in the West is that the toll would like­ly ben­e­fit the Is­lam­ic Rev­o­lu­tion­ary Guard Corps, which is re­spon­si­ble for Iran’s bal­lis­tic mis­sile pro­gram, sup­press­es do­mes­tic po­lit­i­cal op­po­si­tion, and is list­ed as a ter­ror­ist or­ga­ni­za­tion by the U.S. and the Eu­ro­pean Union. —FRANK­FURT, Ger­many (AP)

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Sto­ry by DAVID MCHUGH and JOHN LEICES­TER | As­so­ci­at­ed Press

John Leices­ter re­port­ed from Paris. Michael Bieseck­er in Wash­ing­ton con­tributed to this re­port.