Oman has found itself entangled in a geopolitical standoff after Iran announced it was collaborating with the Gulf state on the future management of the Strait of Hormuz, including Tehran's proposal to impose fees on commercial vessels. The Omani exclave of Musandam lies south of the contested waterway, which normally carries a fifth of the world's seaborne oil traffic but has been blockaded for ten weeks since the US-Israeli attack on Iran in February.
US Rejects Toll System
The United States has repeatedly stated that no permanent solution to the blockade can involve paying a toll to Iran, and claims that Oman shares this view. Speaking in India on Friday, Iranian Foreign Minister Abbas Araghchi defined the Strait of Hormuz as an exclusively Omani-Iranian waterway. "The strait is located in the territorial waters of Iran and Oman," he said. "There is no international waters in between." Araghchi added that Iran was coordinating with Oman about future management. Oman has so far remained silent regarding Iran's plans to charge a fee and demand details on the nationality of all transiting ships.
Legal Concerns Raised
Western diplomats argue that Iranian proposals for permanent management are unlawful because they impose tolls on commercial shipping and would grant Iran an arbitrary right to select which ships are allowed passage, potentially based on nationality of ownership. A requirement for every vessel to set up a rial account for payment would likely violate UN sanctions prohibiting funds from reaching the Islamic Revolutionary Guard Corps (IRGC). A rival plan based on freedom of navigation, prepared by France and the UK, has also been presented to Oman and enjoys support from most Gulf states. British officials, including Foreign Office political director Lord Llewellyn, have recently visited Muscat, alongside International Maritime Organization Secretary General Arsenio Dominguez.
International Law Disputes
The legal rights of coastal states to impose tolls lie at the heart of the deadlock over reopening the strait. Iran signed the UN Convention on the Law of the Sea (UNCLOS) in 1982 but never ratified it, meaning it considers itself not bound by the treaty's transit passage rules that underpin freedom of navigation. Instead, Iran relies on customary international law, including a more restrictive right of innocent passage. Tehran claims that even if bound by UNCLOS, the enhanced right of transit passage is conditional and can be restricted in the event of any threat or use of force against the sovereignty, territorial integrity, or political independence of coastal states. Iran stated at the outset of the conflict that the southern shore of the strait, including the United Arab Emirates, was used by the US to arm bases for attacking Iran.
New Iranian Authority
Iran hopes the Persian Gulf Strait Authority (PGSA), established on 5 May, will become a profitable revenue stream. A grey area exists regarding whether Iran can only charge fees for services rendered, or whether it would be compulsory to use those services, effectively turning the service fee into a toll. The PGSA now requires ships to register by email to receive routing information and permission to pass. Payment would be in Iran's national currency, with the fee set at roughly one dollar per barrel.
International Reactions
US President Donald Trump, at a summit in Beijing, claimed that China—which imports nearly 45% of Iran's oil production through the strait—agreed with the US that there could be no tolls or restrictions. US Secretary of State Marco Rubio also stated that China does not favour tolls. The Chinese foreign ministry simply expressed a desire for the blockades to end, attributing the closure to the US-Israel war on Iran. However, the IRGC briefed on Thursday that after talks with China's ambassador to Iran, a large group of Chinese oil tankers were being allowed through the strait by Tehran and had agreed to be subject to Iranian regulations. The wording did not clarify whether a fee was paid by China.
At the time the US imposed its blockade of Iranian ports as a countermeasure to Iran's effective closure of the strait, Trump said: "No one who pays an illegal toll will have safe passage on the high seas." This implied the US navy might feel entitled to block Chinese oil tankers if they paid a toll to Iran, though obtaining evidence at the relevant moment would be challenging.
