US reviews Oman plan for Hormuz transit

• Proposal for service-cost mechanism
• No legal basis for mandatory tolls
• UAE opposes introduction of fees

Omani proposals for a voluntary service-cost mechanism under which the sultanate and Iran would oversee navigation through the Strait of Hormuz are being reviewed by the US.

The proposals, delivered to Washington by Oman, do not include mandatory Hormuz transit tolls, a person familiar with the US position told AGBI.

The person also said that US negotiators have “concerns” but are confident any differences can be resolved at a technical level.

The New York Times, citing an Iranian official and four diplomats with knowledge of the matter, reported that Oman had proposed a system of voluntary fees for ships transiting the strait.

President Donald Trump and other senior White House officials have repeatedly said Iran would not be permitted to impose tolls on ships transiting the Strait of Hormuz.

Omani foreign minister Badr Al-Busaidi said on Monday that management of the strait “must remain within the framework of international law”.

Discussions over a voluntary service-cost mechanism in the strait come amid uncertainty over a reference in a US-Iran memorandum of understanding to reopening the chokepoint under Iranian “arrangements”. This has prompted concerns among shipowners and insurers over how future navigation will be managed.

Documents shared among the shipping industry last month said vessels could be required to obtain insurance from the Persian Gulf Strait Authority, with charges potentially introduced after an initial 60-day free period. Tehran has not publicly confirmed those plans.

Vessels were able to pass through the strait without restriction or charge before the Iran war.

Analysts said there is an important distinction between the current 60-day interim period under the US-Iran MoU and any permanent settlement.

Ships are transiting the strait in an ad hoc manner under the temporary arrangements, but the terms governing navigation after a final agreement could differ, including how maritime services are administered and funded.

The United Nations’ International Maritime Organization (IMO) has said maritime traffic has the right of transit passage through international straits and that “there is no established basis in international law that allows for the imposition of mandatory tolls or fees”.

Hamid Hamirani, former adviser to Oman’s minister of finance and managing director of sovereign wealth advisory BSGI, said there was an important distinction between the current temporary Oman-IMO corridor, which operates without transit fees, and longer-term discussions over the administration of navigation, maritime services and associated costs.

He said there was no publicly confirmed operational fee at present, but that a possible future “service-cost mechanism” remained under discussion.

“An important distinction needs to be maintained between a general charge for the right of transit and the recovery of costs for clearly defined maritime services, such as navigational safety, coordination or other services delivered in accordance with international standards,” he added.

Marco Forgione, director general of the UK-based Chartered Institute of Export & International Trade, said there was no evidence Oman was levying charges. He said Omani authorities had presented proposals for voluntary fees that could form part of a final agreement.

Muscat’s proposal draws in part on the Malacca Strait and Singapore model, in which voluntary industry contributions help to fund safe navigation. The UAE strongly opposes the imposition of tolls or fees on the strait, saying it views such charges as a violation of international law.

• New Iranian attack challenges Hormuz reopening
• Iran’s Hormuz insurance scheme ‘amounts to transit fee’
• Shipowners reluctant to risk the Strait of Hormuz

Before the Iran conflict, the Strait of Hormuz typically handled about 130 vessel transits daily. Around a fifth of the world’s oil supplies would normally move through the waterway.

Neil Quilliam, Middle East and North Africa expert at Chatham House, has previously said that any future charging mechanism would still raise broader questions under the UN Convention on the Law of the Sea, even if it stopped short of mandatory transit tolls.

“The convention allows strait states to regulate safety and pollution matters, but those rules must not deny, hamper or impair transit passage,” he said.

He said the main concerns for shipowners were legal uncertainty, sanctions exposure, duplicate or conflicting insurance obligations, delays from permit and route approvals, and the risk that non-compliance could become grounds for inspection, detention or denial of passage.

“If Iran has physical control over the strait, then it is unlikely to care too much about international law, as it will have the upper hand,” he added.