Iran's Persian Gulf Strait Authority Demands Hormuz Tolls, and US Sanctions Make Paying Them a Risk

Iran now has an agency for Hormuz. The Persian Gulf Strait Authority, set up in early May, says it authorizes and regulates transit through the strait. In practice it runs a permit-and-toll system for ships that want to pass. It's the clearest sign yet that Tehran wants to turn wartime control of the strait into something permanent.

The idea didn't come from nowhere. As early as March 15, Iran set an alternative channel north of Larak Island, and at least one ship reportedly paid $2 million to use it. In April the head of the Iranian parliament's construction committee said lawmakers were drafting a law to ban ships from "hostile" nations and charge everyone else. The new authority puts that into an office with an email address.

How the system works

Operators email the authority and submit a vessel information declaration. It asks for ownership, insurance, the crew list, cargo details and the planned route. A transit permit is issued only after approval and payment.

Iran hasn't published a tariff. Reported payments run up to $2 million per transit. There are also reports of a toll of $1 a barrel for tanker cargoes, which for a fully loaded VLCC works out to about the same $2 million. Payments are said to be settled in Chinese yuan, with some talk of cryptocurrency.

The rules on who can pass are political. Israel-linked ships are banned outright. US-linked ships and those from other "hostile" countries face severe restrictions or refusal. Earlier in the war, Iran's foreign minister said China, Russia, India, Iraq and Pakistan had been granted passage, with Malaysian, Thai, Turkish and Philippine ships allowed through after separate talks.

The sanctions trap

For almost every legitimate shipowner, the toll is a trap. On May 1 the US Treasury's Office of Foreign Assets Control issued guidance warning that payments to Iranian-linked entities could be prohibited under existing sanctions. That exposes non-US companies to secondary sanctions. The risk doesn't stop with the owner. Charterers, cargo traders, banks and insurers involved in a voyage that paid Tehran could all be caught.

So a Greek or Norwegian owner faces a choice with no good answer. Pay the toll and risk losing access to US dollars, US ports and Western insurance. Don't pay, and the ship either doesn't transit or goes through without a permit and risks being hit. Most are choosing not to go at all.

The US has made the risk concrete. Its naval blockade, declared in April, targets ships that pay tolls to Iran. Tankers have been intercepted as far away as Malaysia and the Indian Ocean.

What the numbers show

Before the war about 140 vessels a day went through the strait by one count. On May 11 there were nine transits. On May 5, of 167 commercial vessels tracked in the area, 146 had their AIS transponders switched off and were running dark. When most of the ships in a waterway are hiding from tracking, the waterway isn't functioning as an international strait anymore.

Why the law matters

Under the UN Convention on the Law of the Sea, ships have a right of transit passage through international straits like Hormuz, and coastal states can't suspend it or charge simply for passage. Charges are allowed only for specific services actually provided. Iran signed the convention but never ratified it, and it has long argued that transit passage rights don't apply to ships of non-parties such as the United States.

The Persian Gulf Strait Authority is the practical version of that argument. If it survives the war in any form, it sets a precedent other states with chokepoints will notice, from the Turkish Straits to Malacca. The shipping industry has spent decades relying on free transit through straits as a given. Hormuz shows how fast that can go.