**Proposed Hormuz Passage Deal Faces Challenges Amid U.S. Sanctions**
A recent proposal involving Iran and Oman, which seeks to grant Tehran control over ships navigating the Strait of Hormuz, is proving to be unworkable for the shipping industry, according to multiple industry sources. The proposed arrangement, which would allow Iran to intervene in inbound traffic and establish a route for outbound vessels, faces significant hurdles due to existing U.S. sanctions and restrictive insurance regulations.
Historically, the Strait of Hormuz has served as a crucial maritime passage, facilitating the movement of approximately one-fifth of the world's oil supplies and other essential goods. Prior to the escalation of conflict following U.S.-Israeli airstrikes in late February, the strait was open to all vessels without any associated fees. However, the current proposal has raised concerns about potential tolls and transit fees that could complicate international shipping operations.
Under the terms of the proposal, Iran would be able to monitor and control inbound shipping traffic, while outbound vessels would be required to follow a designated route between Iran and Oman. Clearance for exit would be granted through Oman after notifying Iranian authorities, as indicated by a senior Iranian official.
The world’s leading shipping associations have expressed their apprehension regarding the introduction of compulsory charges for transit through the strait. In an open letter sent to the United Nations’ shipping agency, they argued that such fees would effectively act as a toll, undermining the internationally recognized legal framework governing straits used for international navigation. The letter emphasized the importance of ensuring that merchant ships can navigate international waters "safely, predictably and without unnecessary impediment," which is vital for maintaining resilient supply chains and energy security.
The proposed fees have sparked a debate among the involved parties. Reports suggest that Iran is seeking to impose fees ranging from 5% to 7% of the cargo price for vessels using the strait, while Oman is considering a fee of approximately 3%. In contrast, the U.S. government advocates for a system with no fees at all. The International Maritime Organization (IMO) has refrained from commenting on the specific proposals but has previously underscored the need for non-discriminatory and unimpeded transit passage through the strait.
The potential introduction of fees raises compliance issues for shipping companies and oil traders, particularly given the U.S. sanctions imposed on the Persian Gulf Strait Authority, which Iran established in May to manage the waterway. The U.S. Treasury has prohibited American entities from engaging with Iranian services related to "guarantee of safe passage," meaning that any payments made could result in asset freezes.
Adding to the complexities, the Lloyd’s Market Association (LMA) introduced a clause in late July that terminates insurance coverage for vessels that pay transit fees or tolls for passage through the Strait of Hormuz. This clause creates a significant dilemma for shipping companies, as they are required to pay an additional war risk premium for insurance coverage against potential damages during transit. Under the LMA's stipulations, insurers would not be liable for any claims related to payments made for passage, effectively discharging them from their obligations.
Industry sources have described the situation as a "catch 22" for shipping companies, caught between the desire to comply with Iranian regulations and the constraints imposed by U.S. sanctions and insurance requirements. As discussions continue, the feasibility of the proposed deal remains uncertain, with significant implications for global shipping and energy markets.
The Strait of Hormuz, a narrow waterway connecting the Gulf to the Indian Ocean, has long been a focal point of geopolitical tensions. The ongoing conflict and proposed changes to its management could further complicate an already volatile situation, impacting not only regional stability but also the broader dynamics of international trade and energy security.