Around 20 per cent of global oil trade passes through the Strait of Hormuz.

Iran, Oman get to levy Hormuz transit fee under 2-week ceasefire plan: Report

The US-Iran ceasefire plan includes reopening the Strait of Hormuz with a provision allowing Iran and Oman to levy transit fees on ships.

by · India Today

In Short

  • US and Iran agree on two-week ceasefire ending 40-day conflict
  • Ceasefire includes plan for transit fees on ships through Hormuz
  • Iran plans to use fees for post-war reconstruction efforts

The two-week ceasefire plan between the US and Iran includes a provision allowing both Iran and Oman to levy transit fees on ships passing through the Strait of Hormuz, the narrow mouth of the Persian Gulf that facilitates roughly one-fifth of global oil trade.

The 34-km-wide strait lies within the territorial waters of both Oman and Iran and has been considered an international waterway, with no tolls levied by either country in the past.

Tehran officials, according to news agency AP, said Iran would use the funds for post-war reconstruction, as the conflict has caused widespread destruction to the country’s defence, administrative, and civilian infrastructure.

Both the US and Iran agreed to a ceasefire early Wednesday to end the 40-day conflict, with Tehran accepting to conditionally reopen the strategic waterway, which had effectively been closed since the war began on February 28. The closure, marked by attacks on vessels transiting the route, had sent global oil prices soaring.

Further discussions, including the future of the Strait of Hormuz and other aspects of a long-term peace, are likely to be taken up in negotiations between the US and Israel, set to begin in Islamabad on Friday.

Hormuz Strait, a strip of water only 34 km wide between Iran and Oman, provides passage from the Gulf to the Indian Ocean and is the main route for about a fifth of world oil supplies and other vital goods including fertilisers.

Agreeing to the ceasefire, US President Donald Trump remarked that Iran had presented a 10-point proposal that was a "workable basis" for negotiations and that he expected an agreement to be "finalised and consummated" during the two-week window.

"We received a 10 point proposal from Iran, and believe it is a workable basis on which to negotiate. Almost all of the various points of past contention have been agreed to between the United States and Iran, but a two-week period will allow the Agreement to be finalised and consummated," he said, without specifying any points of negotiations.

According to Reuters, the transit fee would vary depending on the type of ship, its cargo, and other prevailing conditions. Iran’s Deputy Foreign Minister Kazem Gharibabadi said last week that Tehran was drafting a protocol with Oman in this regard, adding that the move was intended to facilitate, rather than restrict, transit.

Gulf nations, including the United Arab Emirates and Qatar, have taken a stance against any such move, calling for free and open navigation and stating that any discussion on financial mechanisms should wait.

Under the United Nations Convention on the Law of the Sea (UNCLOS), which governs international maritime law, states bordering straits cannot demand payment merely for granting passage. However, they may impose limited fees for specific services such as piloting, tugging, or port services, provided these are not levied more heavily on vessels from any particular country.

- Ends