Iran Plans New Passage System as Seoul Rejects Fees on International Law Grounds
An oil tanker anchored near the Strait of Hormuz. (Reuters)
As Iran previews the unveiling of its own control system to manage vessel traffic in the Strait of Hormuz, the calculations of the domestic shipping industry and the government are becoming increasingly complex.
With the government adhering to a ‘no toll’ principle citing violations of international law, and the United States also warning of intense sanctions, analysts note that shipping firms have fallen into a deadlock where they can neither pay fees to Iran nor find an independent way out.
According to the industry on May 18, 26 vessels of domestic shipping companies and 158 crew members remain stranded and isolated inside the Strait of Hormuz.
Under these circumstances, Ebrahim Azizi, head of the Iranian Parliament’s National Security and Foreign Policy Committee, announced plans to unveil it shortly, stating, “We have established a specialized mechanism to manage passage through the Strait of Hormuz within the framework of defending national sovereignty and securing international trade security.”
He went on to say, “Only commercial vessels and countries cooperating with Iran will receive the benefits of the new system,” indicating an intent to officially collect what is essentially a ‘toll (costs and fees)’ in exchange for establishing designated routes and monitoring maritime safety.
This measure came immediately after United States President Donald Trump and Chinese President Xi Jinping mutually confirmed their stance against the militarization of the Strait of Hormuz and the imposition of tolls during the US-China summit on May 14 (local time). This is tantamount to playing a card for a head-on breakthrough to preemptively seize control of the strait in the face of pressure from the international community.
On the other hand, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) warned, “We will sanction shipping companies that pay tolls to Iran or request safety guarantees.” This is a warning that it will apply a ‘secondary boycott,’ which expels entities from the US financial system if they pay money to Iran.
The South Korean government is also adhering to its stance of rejecting tolls. Minister of Oceans and Fisheries Hwang Jong-woo clarified the stance of refusing toll payments on May14, stating, “Charging fees without special services is a violation of international law.”
Amid the government’s resolute adherence to principles and the US warnings of sanctions, shipping companies in the field are complaining about their inability to find an exit. This is because they cannot comply with Iran’s demands, yet without government cooperation or a diplomatic breakthrough, there are absolutely no measures shipping companies can take other than blindly holding out.
An official from SK Shipping explained, “The current situation is not so much a choice between two options but a deadlock with no way out,” adding, “It is not a matter on a level where individual shipping companies can act alone.”
The official added, “As the safety of the vessels and crew is the top priority, we are communicating closely with the Ministry of Oceans and Fisheries,” and, “We will only be able to move when comprehensive coordination among stakeholders, including not just shipping companies but also oil refiners, shippers, insurance companies, and government agencies, along with the overall necessary conditions, are established.”
The massive fixed costs and lost revenue arising from the prolonged isolation period of the vessels also pose a significant burden. The blow is growing particularly severe as it coincides with the shipping industry’s entry into its full-fledged peak season starting in the second quarter. It is reported that the currently isolated vessels are continuing to receive supplies such as food and drinking water through small boats.
An HMM official lamented, “Officially, shipping companies tied up in the strait have nothing they can do other than watch the developments of the situation,” and, “With the isolation prolonged, only expenses are being spent and revenue losses are accumulating, leading to a situation where the burden has reached its peak.”
He continued to express concern, “Normally, the second and third quarters are the massive peak season for container shipping companies, where the cargo volume of consumer goods for the second half of the year, from summer vacations to the year-end, moves a quarter early,” and added, “Furthermore, with oil prices doubling, the cost burden has increased across all routes, and the sources of demand for container revenue heading to the Middle East have simply evaporated, making it seem unlikely to easily recover from the immediate blow even if the strait is reopened to traffic.”
Choi Mun-hee
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