Hormuz crisis: Iran, which has unofficially blocked the Strait of Hormuz since February 28 when the current West Asia conflict erupted, is now reportedly considering charging a toll for allowing ships to pass through the strategic waterway, which handles around around 20 percent or one-fifth of global oil and gas trade.
Will Iran charge ‘toll’ on Strait of Hormuz?
According to reports, Iran’s parliament is considering a proposal to levy what it describes a ‘security fee’ on ships passing through the Strait of Hormuz. The fee would be levied on countries which use this strategic waterway for oil, gas, and trade.
Experts say Iran seeks to capitalize on its stranglehold on the Hormuz waterway and assert complete control over the vital shipping route by imposing a sort of ‘toll-tax’ on ships who wish to cross it, giving Tehran de facto legitimacy over the seaway.
Why Iran seeks to tax Hormuz passage?
The move also aims to put more pressure on the United States and its allies as transit fees on oil and gas shipping would further increase crude oil and gas prices, worsening the ongoing global energy crisis triggered due to US and Israel’s war on Iran and the ensuing tensions in the Middle East.
Iran has termed the proposed toll on the Strait of Hormuz as a security fee, but experts believe Tehran aims to wield the strategic shipping route as a geopolitical weapon to build pressure on the United States.
West Asia war escalates as Iran targets energy infra across Gulf
The development comes as Iran ramped up attacks on energy infrastructure in Gulf states, including Qatar’s LNG (liquefied natural gas) hub of Ras Laffan, in retaliation to Israeli strikes on Iran’s South Pars gas fields further exacerbating global energy concerns as the West Asia conflict reached new levels of escalation.
According to reports, Iranian strikes caused significant damage to Qatar’s Ras Laffan LNG facility, the world’s largest gas plant. Tehran also targeted a refinery in Saudi Arabia, while its strikes sparked fires at two Kuwaiti refineries, and forced the United Arab Emirates (UAE) to close its gas plants.
While Iran has previously targeted energy infrastructure in Gulf states, Thursday’s attacks were more intense as Islamic Revolutionary Guards Corps (IRCG) had warned of severe retaliation if Iran’s energy facilities were hit.
How Iran’s Hormuz tax will impact India?
As per recent shipping data, more than 80% of oil shipments through the Strait of Hormuz are destined for Asian markets, with China being the largest buyer (over 90%) of Iranian crude, and while Saudi Arabia and the UAE have limited bypass routes, their combined alternative capacity is barely 2.6 million barrels per day.
.According to real-time data and analytics provider, Kpler, India’s exposure to oil procurement via Strait of Hormuz has increased in the last few months due to its recent pivot back towards Middle Eastern crude imports.
Ship tracking data shared by Kpler reveals that approximately 2.5-2.7 mbpd of India’s crude imports arrive through the vital strait, which means nearly half of India’s oil imports, largely sourced from Iraq, Saudi Arabia, the UAE and Kuwait, are dependent of the strategic waterway.
Meanwhile, the Central government had assured there is no imminent LPG shortage in the country, asserting that supplies remain normal, while attributing the nearly 94% surge in LPG bookings to people making panic bookings due to the Iran war.
In a related development, US President Donald Trump has announced a temporary 60-day waiver of the Jones Act to ease rising energy prices which have skyrocketed due to the volatility in global oil markets triggered by the West Asia conflict, particularly Iran’s blockade of the Strait of Hormuz.