The Daily View: A dangerous precedent
TEHRAN’S 10-point list of demands to end the war are maximalist, as are Washington’s right now. Most will not make it into any potential final agreement.
But the shipping industry, and everyone else, should be looking very carefully at the potential for a “deal” over the future of the Strait of Hormuz.
Iran is not prepared to give up the leverage of control over the strait it has claimed and is looking for payment of compensation in any agreement to end the conflict.
The fact that Donald Trump has “floated” the possibility of a joint US-Iran tolled system for shipping traffic, following the cessation of hostilities, is starting to worry political and industry leaders.
Imposing such a toll would set a dangerous precedent. Not our words — that comes direct from the secretary-general of the International Maritime Organization and is echoed by foreign ministers across the global economy.
The UN Convention on the Law of the Sea outlines the rules that govern straits used for international navigation, and there is no legal nuance here. To be clear: there is no international agreement where tolls can be introduced for transiting international straits.
This established mechanism — the Traffic Separation Scheme (TSS) in the Strait of Hormuz — was proposed by Iran and Oman, and adopted by IMO in 1968. It is based on international maritime law and has served the region for decades.
But given the pace at which established norms and the rules-based order are being rewritten of late, the lack of any legal precedent is not the barrier to change that it once was.
Oman and Iran have been in talks. Washington and Tehran have been exchanging demands, both publicly and privately.
While Iran may be currently getting away with a makeshift system of crypto and yuan settled fees for those ships not operating under the protection of diplomatic favour, few see the current Tehran toll booth as a sustainable situation.
Quite apart from the international outrage, Iran cannot unilaterally charge a toll on ships hugging the Omani coastline. But a bilateral Iran-Oman transit authority would theoretically bypass that problem.
For Oman it would mean a revenue stream and more strategic relevance.
For Iran there is compensation, but more significantly stewardship over the world’s most important energy chokepoint.
For everyone else it represents a deeply problematic precedent that would have lasting consequences far beyond the Middle East.
The minor upside for shipping — that it would get a more predictable process than the current system of Islamic Revolutionary Guard Corps commanders deciding by geopolitical whim who passes, who doesn’t, and an unpredictable pricing mechanism — is in no way enough to view this as a good outcome for global trade.
Richard Meade
Editor-in-chief, Lloyd’s List
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