Iran-U.S. MOU opens doors for Iran to stake claims in Strait of Hormuz

The text of the Iran-U.S. MOU, as read out by U.S. officials and reported in the media, contains two key provisions regarding shipping. While promising to relieve sanctions on Iranian oil sales, the agreement opens the door for Iran to stake a claim in ship passage in Strait of Hormuz and charge a fee for transit. Before the war, Iran did not exercise such a right, and no toll or fee was mandatory for any merchant ship transiting the strait.

The U.S. will fully end its naval blockade within 30 days and has undertaken to terminate all sanctions on Iran according to an agreed schedule. Until then, the U.S. Department of the Treasury will issue waivers for the export of Iranian crude oil and petroleum products. The wording of these waivers will clarify whether sanctions imposed on ships carrying Iranian oil will also be waived. During the 30-day period, traffic will be “proportional” to pre-war levels.

Iran will make efforts to facilitate the transit of vessels free of any charge, but this free passage is explicitly mentioned as applying to only 60 days. Iran will also remove technical and commercial obstacles, including removing mines, within 30 days so that vessels can begin transiting.

Iran will negotiate with Oman, the other key littoral state in the Strait of Hormuz, to define future administrative and maritime services. Iran has said in the recent past that it intends to charge for those services.

Other Persian Gulf states, including Qatar, Saudi Arabia, Iraq, Kuwait, and the UAE, will be involved in discussions on the future status of the Strait of Hormuz. Some of these nations have, in the past, vehemently opposed any toll. International shipping interests, including India, have also opposed tolls.

The inference is that the agreement brings ship passage through the Strait of Hormuz to the negotiating table, with Iran recognised as a key stakeholder. 

The MOU states that the future arrangements will be in accordance with international law.

A key body of international law governing shipping is the United Nations Convention on the Law of the Sea (UNCLOS), which the U.S. has not ratified. Iran has signed it but has not ratified it.

UNCLOS contains detailed provisions on various types of straits. In the Strait of Hormuz, one side leads to a semi-enclosed body of water, much as the Black Sea does, while the other opens into the Gulf of Oman and eventually the open sea. UNCLOS discusses such straits as areas where no toll should be levied, but where vessels enjoy transit rights rather than open-sea navigation rights if no international waters or exclusive economic zone corridor passes through the strait. 

While Iran had presented a toll on the Strait of Hormuz as a means of funding post-war reconstruction, the agreement provides for a separate massive reconstruction fund in addition to oil-sale revenues. More significant than any toll, however, is that a formal agreement recognising Iran as a stakeholder in the Strait of Hormuz would be consistent with Iran’s description of the strait as the place where its sword will hang as a guarantee against future attacks.