Gulf states back plan to let Iran collect voluntary fees to use Hormuz

DUBAI - Oman has won backing from Gulf states for a plan that would let Tehran collect voluntary fees to use the Strait of Hormuz, a Gulf source told Reuters on July 28, a path towards ending the disruption to oil trade caused by the US-Israeli war on Iran.

US President Donald Trump, who abruptly called off a two-week bombing campaign over the weekend in his latest strategic U-turn, said there were “good talks” under way with Iran, but threatened to restart strikes unless negotiations deliver. Iran denies seeking to resume talks with the US.

Washington launched its renewed bombing campaign earlier in July to break Iran’s grip on the strait, through which about a fifth of global oil and liquefied natural gas flowed before the war.

Iran effectively shut the strait to ships other than its own after the US and Israel attacked on Feb 28. A deal in June between the US and Iran partially reopened it, but the agreement collapsed in early July after Iran fired on ships using a channel it does not approve.

Iran has said it wants to manage the strait alongside Oman, which controls the opposite shore, and charge service fees to ships that use it. Washington wants to return to the status quo prior to the war, when ships were able to pass freely with no payments, and says charging mandatory fees would be illegal.

Under the Omani proposal, Iran would not exercise sole control and fees would be voluntary, a source told Reuters. The system would be analogous to one in place on Asia’s Strait of Malacca, where Indonesia, Malaysia and Singapore ask ships to pay voluntary contributions to fund navigation, environmental protection and search-and-rescue operations.

Iran’s Foreign Minister Abbas Araqchi discussed the Strait of Hormuz with his Omani and Saudi counterparts on July 27 and stressed the need for regional cooperation, an Iranian Foreign Ministry statement said.

Trump warns of more strikes

Trump called off his latest campaign of air strikes after receiving advice from military commanders that the strategy had run its course. The 13 nights of renewed US bombing killed scores in Iran and destroyed bridges and tunnels across the south, as well as military targets.

Iran had responded with attacks on US bases in neighbouring countries that killed four service members, and strikes on civil infrastructure in Gulf states that it said was retaliation for US strikes on civilian targets.

Iran has said it would hold fire as long as Washington does. But drone attacks were reported in Jordan, Saudi Arabia and northern Iran on July 27, and Jordan reported another drone being downed on July 28.

Speaking on July 27, Trump expressed optimism for a deal to end the five-month conflict, while warning that US strikes would resume if negotiations failed to deliver.

“I think there’s a good chance that something could happen, and if it does, good, if it doesn’t, we go back to doing what we were doing two days ago.”

Iran says it has not sought any new negotiations with the US, which it accuses of violating the agreement reached last month on a framework for talks to end the war.

The US President is scheduled to meet Israeli Prime Minister Benjamin Netanyahu in Washington on July 28. Although Israel was involved in the initial bombing campaign, it has not been part of subsequent peace talks, and recent relations between the two leaders have been strained.

Trump has had to rein in the Israeli leader from attacking targets in Lebanon to try to weaken Iran-backed Hezbollah militants, complicating peace talks with Tehran.

The end of the US bombing campaign over the weekend sent oil prices tumbling by around 8 per cent on July 27, and the fall continued on July 28. Brent crude futures were down more than 2.5 per cent at around US$86 a barrel by mid-morning on July 28.

Washington and Tehran reached an agreement in June on a framework for talks meant to take place by the end of August to resolve major issues such as Iran’s nuclear programme.

But they have disputed the meaning of the memorandum’s language about the strait, with Washington insisting it requires Tehran to allow free travel, while Iran says it grants it the authority to supervise transit. REUTERS