The Hormuz toll Iran wants and Trump might let slide

Two irrefutable fundamentals exist in the Strait of Hormuz which are colliding with a core tenet of the global rules-based international order. Geography and Iran’s resilience are now in competition with the freedom of navigation.

No matter the outcome of the war, Iran’s coastal geography is not about to change. Its territory stretches 167 km from the Gulf of Oman along the northern coast of the Strait into the Arabian Gulf (Opens in new window). When a final and lasting peace deal is agreed upon Iran will remain dominant in the Strait. As Oman’s coast also borders the Strait its role in ongoing management of the waters cannot be discounted.

The American decapitation strategy of Iran’s military and political leadership launched at the start of the war successfully removed Supreme Leader Ayatollah Ali Khamenei but the Iranian regime did not fall, and his place has been taken by his son Mojtaba Khamenei. If anything, the sustained assault on Iran’s leadership has only hardened Tehran’s resolve. Iran has become sufficiently emboldened to make demands for how the war will end on its terms, including the future of the Strait (Opens in new window).

These realities are challenging the freedom of navigation, which is a long-recognised principle that Iran previously honoured. This is not only a fundamental principle of the law of the sea but also underpins the global trading regime.

Recognised since the 1600s and most recently in the 1982 UN Convention on the Law of the Sea (Opens in new window), the principle provides for the unfettered right of transit passage in international straits (Opens in new window). Legally all ships enjoy the right of toll-free navigation through international straits without fear of interference providing they do so peacefully and consistently with broad legal controls. Bass Strait (Opens in new window), Dover Strait (Opens in new window) and the Strait of Gibraltar (Opens in new window) are all international straits in this category. Historically, the Strait of Hormuz has likewise been considered an international strait where transit passage applies (Opens in new window).

The United States has been one of the most persistent and powerful advocates of the freedom of navigation. Since the 1970s a Congressionally approved “Freedom of Navigation (Opens in new window)” program has been conducted in which the US Navy physically asserts navigation rights in straits and other contested waters, while the State Department diplomatically challenges excessive maritime claims that interfere with freedom of navigation. The South China Sea and the Taiwan Strait have been a particular focus for US Freedom of Navigation Operations in the past decade.

Since the collapse of the June MOU between the US and Iran there have been multiple reports of how the Strait could be fully reopened. Iran and Oman have now reportedly developed a proposal (Opens in new window) that would permit two-way shipping traffic via a northern Iranian in-bound route and out-bound via a southern Omani route. No tolls would be imposed on ships passing through the Strait but an undefined “service fee” has been suggested.

Irrespective of the outcome of this proposal there will be no resumption of anywhere near pre-war shipping traffic until all Iranian mines in the Strait (Opens in new window) have been removed and there is a final and lasting cessation of hostilities. The United States will be critical to both those objectives being reached.

Australia is not just an observer in the resolution of navigation rights in the Strait of Hormuz. Its standing as a maritime nation is centred upon respect for the freedom of navigation. This permits the ships of all Australia’s trading partners to freely sail the seas to and from Australian ports.

This is especially important for Australia given that Lombok and Sunda Strait within the Indonesian archipelago, and Malacca and Singapore Straits, are critical shipping lanes for all Australian trade. Any disruption to navigation through those waters would have serious economic consequences for Australia given the volume of Australian trade that passes through Southeast Asia.

In April, Canberra would have been alarmed when the Indonesian Minister of Finance, Purbaya Yudhi Sadewa (Opens in new window), suggested shipping tolls could be imposed in the Strait of Malacca. That suggestion gained no support in Jakarta, but it highlights how sensitive any discussion of shipping tolls can be.

Canberra will also be mindful that Australia’s compulsory pilotage laws that apply in the Great North East Channel of Torres Strait (Opens in new window) since 2006 may be used as precedent in the Strait of Hormuz. However, Australia only adopted that measure following international endorsement by the International Maritime Organisation which oversees global shipping safety and navigation standards.

Whatever resolution is reached for post-war Strait of Hormuz shipping there needs to be an absolute resistance to any imposition of a shipping toll or an equivalent service fee. Toll-free straits have been fundamental to freedom of navigation, which all countries benefit from. The dealmaker in Donald Trump may not be too concerned about the war leaving a legacy of Strait of Hormuz tolls. Eager to end the conflict he could just see it as a normal cost of doing business. Australia and the rest of the world will not see it that way.