The Toll That Is Only Illegal When Iran Collects It
usapolitics.news Analytical Journalism
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Iran's claim on the Strait of Hormuz has a precedent. It's called Egypt. And Panama.
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"There will be NO TOLLS in the Hormuz Strait — unless they are imposed by and for the United States of America." — Donald J. Trump, Truth Social, June 2026
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The argument against Iran charging a transit fee through the Strait of Hormuz rests on two pillars: that it violates international law, and that it has no historical precedent. The first claim is genuinely contested. The second is simply false.
On June 18, 2026, as the ink was still drying on the US-Iran memorandum of understanding signed in Versailles, Tehran made clear that the question of payment for Hormuz transit was not settled by the agreement. Iranian Foreign Ministry spokesman Esmaeil Baghaei was precise about the distinction his government was drawing: "We are not seeking to levy transit tolls; however, fees will be charged in exchange for the services that are provided." President Trump, who had announced the waterway would be "permanently toll-free," found himself immediately in a semantic dispute with a country that had just spent four months demonstrating it could make the global energy market convulse. The MOU's ambiguity on this point was not accidental. It reflected an unresolved confrontation between two legal frameworks, two definitions of sovereignty, and two very different readings of what the canal precedent actually permits.
Iran's case, stripped of wartime rhetoric, is more coherent than its critics allow.
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At its narrowest point, the Strait of Hormuz is approximately 21 nautical miles wide. Both Iran and Oman extended their territorial seas to 12 nautical miles in the late 1950s and early 1970s respectively, which means that by 1972 the strait was entirely enclosed within the combined territorial waters of the two bordering states. Every tanker that transits the strait passes through sovereign waters. There is no international corridor, no strip of high seas threading through the middle. The shipping lanes — two miles wide in each direction, separated by a two-mile buffer zone — run primarily through Omani waters but also through Iranian waters, and the navigable deep-water channel runs closest to the Iranian coastline, near the islands of Qeshm, Hormuz, and Larak.
This geography is the foundation of Tehran's legal position. Iran signed the United Nations Convention on the Law of the Sea in 1982 but has never ratified it. That matters enormously. Upon signing, Iran entered a declaration stating that only states party to UNCLOS could benefit from the contractual rights created within it. Iran's position, consistently held through four decades, is that the strait falls under the older regime of innocent passage as established by the 1958 Territorial Seas Convention and the International Court of Justice's 1949 Corfu Channel ruling.
The United States has never ratified UNCLOS either, yet invokes it selectively — accepting its navigation provisions as binding custom while rejecting UNCLOS's deep-seabed mining regime — validating the treaty when it serves American strategic interests at sea, rejecting it when it would cost American companies money beneath it. Vance called Iran's toll plan "illegal" and demanded the strait remain permanently toll-free; Trump days later reserved the right to impose the identical charge, provided it was collected "by and for the United States of America." The legal scholars who have examined whether transit passage has genuinely crystallized into customary law binding on non-parties — including researchers at the Norwegian Centre for the Law of the Sea — conclude the question is not settled.
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While the legal debate about Hormuz has proceeded in law reviews and diplomatic cables, two countries have been quietly demonstrating that controlling a maritime chokepoint is among the most lucrative franchises on earth — and that the United States, which built one of those chokepoints and operated it for 85 years, no longer collects a dollar from either of them.
Egypt's Suez Canal peaked at over $10 billion in revenues in 2023, then lost more than half that figure in 2024 after Houthi attacks on Red Sea shipping drove carriers around Africa. Even at the reduced level, Egypt collected billions from ships exercising what the international community calls a right of passage — through a pandemic, a grounded container ship, and a year of missile attacks — without a single international legal challenge to its right to do so. About ten percent of global trade passes through the canal. Egypt charges what it chooses, because Gamal Abdel Nasser nationalized it in 1956 and the world eventually accepted that fact.
Panama is the other half of this argument — and the more pointed one, given Washington's current posture. The Panama Canal was built by the United States, operated by it for 85 years, and handed to Panama in 1999. Since then Panama has set the tolls unilaterally and kept the revenue — nearly $5 billion in fiscal year 2024 and $5.7 billion in 2025, with a single large containership paying over a million dollars per crossing. No international tribunal has jurisdiction over its toll schedule.
The United States, meanwhile, controls no strategically significant international waterway and collects tolls on none. Trump has repeatedly demanded to "take back" the canal he insists was given away "foolishly," and the State Department in early 2025 even falsely claimed a deal had been reached allowing US government vessels free transit — a claim the Panama Canal Authority immediately and publicly denied. The country insisting Iran cannot charge for passage through a strait it geographically controls is the same country that built, operated, and then surrendered the world's second most important maritime chokepoint, and is now attempting to pressure its successor into preferential rates.
The canal states together — Egypt and Panama — collect between five and fourteen billion dollars annually, depending on traffic conditions, from fees imposed on ships passing through waterways they happen to control by virtue of geography and political circumstance. Neither built the sea lanes they monetize. The argument that Iran may not similarly benefit from its geographic position requires distinguishing these cases, and the distinctions available are fewer and less decisive than the consensus narrative suggests.
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The standard objection runs as follows: the Suez and Panama canals are artificial waterways built by human labor, running entirely through the sovereign territory of their respective states. The Strait of Hormuz is a natural passage, and natural international straits are governed by a different legal regime precisely because their strategic importance to global navigation is too great to permit coastal state leverage over access.
This is the logic of UNCLOS Part III. When the convention was negotiated in the 1970s and finalized in 1982, the transit passage regime was the price the major maritime powers — led by the United States — extracted from coastal states in exchange for accepting the extension of territorial seas from three to twelve nautical miles. The deal was explicit: coastal states could extend their waters, but straits within those extended zones would remain subject to unimpeded transit. A coastal state accepting twelve miles of territorial sea automatically accepts transit passage through straits that fall within those waters.
Iran's response is that it never accepted this deal. It signed UNCLOS without ratifying it, expressly preserved its rejection of the transit passage regime, and has maintained domestic legislation — the 1993 Law on Marine Areas — requiring prior authorization for categories of ships including warships, submarines, and vessels carrying materials that could harm the marine environment.
The point is not that Iran's position is clearly correct. It is that the legal situation is genuinely contested in ways that the declaratory responses of Western governments obscure. The Lawfare analysis published in March 2026 acknowledged directly that "both the U.S. and Iran are living in two different worlds when it comes to the international laws governing the strait." Two non-parties to the defining treaty, applying incompatible frameworks, with no common rulebook and no adjudicative body with uncontested jurisdiction to resolve the dispute.
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Tehran's current framing — fees rather than tolls — is legally significant, not merely cosmetic. Iran's Foreign Ministry has described the charges as covering navigational assistance, vessel insurance, and environmental protection, jointly administered with Oman. The establishment in May 2026 of the Persian Gulf Strait Authority, a government agency charged with managing "safe passage permits," formalizes this structure.
The fee-versus-toll distinction has genuine legal grounding. Under international maritime law, coastal states may charge for specific services provided to transiting vessels — pilotage, waste collection, traffic management, navigational assistance — without those charges constituting a toll on the right of passage itself. Turkey invoices ships for piloting services through the Bosphorus Strait on exactly this basis.
The distinction, critics argue, collapses in practice. Ships coordinating with the IRGC, rerouted through Iranian waters near Qeshm and Larak, broadcasting an assigned code on a designated radio channel, escorted by Iranian naval vessels, and paying between $1.5 million and $2 million per crossing are not purchasing a service — they are paying to pass. The same could be said of any vessel that declines Turkish piloting in the Bosphorus and finds itself unable to transit. The difference is that Turkey is a NATO member, and the criticism is applied accordingly.
The Egypt parallel cuts even deeper. The Suez Canal Authority levies fees for pilotage, towing, mooring, and related services on top of its basic transit toll — the distinction between the two is administrative, not legal. Egypt charges for passage, labels portions of it as service fees, and the international community accepts the aggregate without complaint. Panama does the same, with an even more elaborate fee structure in which reservation surcharges alone can run into the hundreds of thousands of dollars on top of the base toll. If the aggregate is accepted for Egypt and Panama, the principled basis for rejecting it at Hormuz requires something more than pointing to the fee-versus-toll distinction. The question Iran is now raising is whether that accommodation has a principled basis that excludes Hormuz, or whether it reflects nothing more than which side of the Western order the collecting state happens to occupy.
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Before February 28, 2026, approximately 20 to 25 percent of the world's seaborne oil and 20 percent of global liquefied natural gas exports passed through the Strait of Hormuz daily — an energy trade valued at roughly $600 billion annually. Some 150 vessels transited per day. Iran collected nothing.
It had never collected anything. The toll system was entirely a product of the 2026 war; before the US-Israeli strikes, the strait was toll-free and had been for as long as it mattered to global trade. Egypt, in the same period, was collecting between four and ten billion dollars a year. Panama was collecting five to six billion. Both were doing so on the basis of geographic control over a chokepoint they happen to occupy, through waterways neither of them built in any meaningful hydrological sense.
The moral case for treating these situations differently requires something more than the observation that canals are artificial and straits are natural. It requires either a coherent principle that geography-based sovereignty produces revenue rights in some cases but not others — a principle that has not been clearly articulated — or a frank acknowledgment that the difference is political rather than legal: that Egypt and Panama are aligned with or acceptable to the Western-led order, and Iran is not, and that the rules are applied accordingly.
Iranian lawmakers proposing toll legislation have made this point explicitly, if crudely. Their argument — that Iran's geographic contribution to global energy logistics has been permanently subsidized by the rest of the world at Iranian expense — is not without foundation. Whether it justifies the particular mechanism Iran has adopted, in the context of a war Iran's government helped precipitate through its own conduct and alliances, is a separate question. But the equity argument for some form of recognition of Iran's geographic position does not depend on the circumstances of the 2026 conflict. It predates the war by decades.
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The June 2026 MOU commits Iran to begin reopening the strait within thirty days, including demining operations. The fee question has been deferred rather than resolved. Iran established the Persian Gulf Strait Authority before the agreement was signed and has given no indication it intends to dissolve it. Trump's insistence on a "permanently toll-free" waterway and Iran's insistence on charging for services provided are structurally incompatible positions that will require a second phase of negotiation. That negotiation has not yet begun.
What is already clear is that the legal and geopolitical consensus around Hormuz — that it is simply an international strait, governed by customary transit passage rights, through which no state may extract revenue — has been disrupted in ways that will not be fully reversed by any peace agreement. Iran has demonstrated that it can shut the strait and extract payments from ships that wish to pass. The Egyptian and Panamanian precedents did not create Iran's claim. But they make it considerably harder to dismiss.
The Suez Canal was nationalized seventy years ago. The international community eventually accommodated that nationalization not because it was clearly lawful under the rules then in place, but because the alternative — permanent armed confrontation with a sovereign state over its geographic position — was worse than accommodation. The question now facing the international community on Hormuz is whether a similar accommodation is conceivable, what form it might take, and what principles it would establish for the next chokepoint state that decides to present an invoice.
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Sources: Suez Canal Authority financial statements via Egypt Today and Euronews (April 2025); Panama Canal Authority FY2024 and FY2025 financial results via Panama Canal Authority and Latin News (October 2025); Red Sea crisis and Houthi attacks via Wikipedia and gCaptain (2024–2026); US strikes on Houthis via Al Jazeera, Atlas Institute for International Affairs; Panama Canal history via Britannica; US-Panama toll dispute via CNN, Axios, Al Jazeera (February 2025); Strait of Hormuz geographical and legal analysis via Wikipedia, Opinio Juris (May 2026), Lawfare (March 2026), Chatham House (April 2026), The Conversation (April 2026), Eno Center for Transportation (April 2026), Pennington's Law (April 2026), Lexology (April 2026), and QIL-QDI; Iran toll system via NPR (April 2026), CNBC (March 2026), Bloomberg (April 2026), Kurdistan 24 (June 2026), Geneva Solutions (June 2026), Gulf News (June 2026), Newsweek (June 2026); Trump Truth Social statements via Al Jazeera (June 2026); US UNCLOS and deep-seabed mining via RAND (April 2025), Atlantic Council, Better World Campaign; 2026 Strait of Hormuz crisis and campaign via Wikipedia.
