- A proposed deal that would give Tehran control over ships entering the Gulf through the Strait of Hormuz is not easily workable due to U.S. sanctions and restrictive insurance clauses on any payments, according to four industry sources.
- Control of the strait has been the biggest sticking point in efforts to end the conflict. Under the latest proposal, Tehran would be able to intervene if necessary with any inbound traffic, while outbound traffic would follow a route between Iran and Oman.
- The world's leading shipping associations said in an open letter that the ability of merchant ships to navigate international waterways "safely, predictably and without unnecessary impediment is fundamental to resilient supply chains, economic stability and energy security."
- The shipping associations' letter, sent to the UN's shipping agency, said introducing compulsory charges through the strait for transit or service fees was "a toll in all but name" and would establish a precedent that could undermine the internationally recognised legal framework governing straits used for international navigation.
- Iran is discussing fees of between 5% and 7% of the price of cargoes from ships using the strait, while Oman is discussing fees of around 3%, and Washington wants no fees at all.
- The UN's International Maritime Organization said it could not comment on reports of the proposals, but in July its governing council said countries around the strait should guarantee the "non-discriminatory and unimpeded right of transit passage of all ships" through the traffic separation scheme and that passage should remain free of any tolls and charges.
- For shipping companies and oil traders, any imposition of fees creates major compliance issues given the U.S. has imposed sanctions on the Persian Gulf Strait Authority, which Iran set up in May to operate the waterway.
- The U.S. Treasury has prohibited U.S. persons from receiving services from Iran's government related to a "guarantee of safe passage". Any payment could lead to asset freezes, the industry sources said.
- A further complication is the introduction in late July by Lloyd's Market Association of a clause for use by war underwriters that terminates insurance cover for a vessel if it has paid a transit fee, toll or other charge for passage through the Strait of Hormuz.
- Ships sailing through the strait need to pay an additional war risk premium to ensure they have insurance if their ship is damaged during transit.
- The LMA said in July: "Under the clause, insurers have no liability to indemnify any such payment and, where such a payment has been made, are discharged from obligations in respect of the relevant vessel."
- Shipping companies were in a "catch 22" situation, one insurance industry source said, as the LMA wording prohibits insurers from covering shipowners who pay, while Iran aims to charge a toll.
A proposed deal that would give Tehran control over ships entering the Gulf through the Strait of Hormuz is facing significant challenges due to U.S. sanctions and restrictive insurance clauses. Industry sources indicate that the deal is not feasible, as it complicates payment processes for shipping companies.1
The Strait of Hormuz is a critical waterway, historically open to all ships without fees, facilitating about 20% of the world's oil supplies. However, the proposed arrangement would allow Iran to intervene with inbound traffic, while outbound ships would need clearance from Oman after notifying Iran, raising concerns among shipping associations.
The world's leading shipping associations emphasized that the ability to navigate international waterways safely is essential for economic stability and energy security. They warned that introducing compulsory charges would set a dangerous precedent, undermining the internationally recognized legal framework governing straits used for navigation.45
The U.S. Treasury has prohibited U.S. persons from receiving services related to safe passage guarantees from Iran, creating compliance issues for oil traders. Additionally, a new clause introduced by the Lloyd's Market Association terminates insurance coverage for vessels that pay transit fees, further complicating the situation for shipping companies.810
As one insurance industry source noted, shipping companies find themselves in a “catch 22” situation, where paying tolls to Iran could lead to a loss of insurance coverage, while the U.S. insists on no fees at all.6
“Iran is discussing fees of 5% to 7% of cargo value, while Oman seeks around 3% and Washington wants none. The LMA clause leaves insurers with no liability for any such payment, creating a 'catch 22' for shipowners.”
