Iran May Charge $1 Per Barrel for Ships Passing Through the Strait of Hormuz

Bloomberg reported on April 1 that Iran may charge a toll of at least $1 per barrel of crude oil for ships transiting the Strait of Hormuz. Efforts to mitigate the risk are increasingly focused on finding alternative routes.

According to Bloomberg, Iran will allow ships from “friendly countries” to navigate the strait after paying the toll. Iran rates countries on a five-tiered system of friendliness, with higher-rated countries receiving more favorable passage conditions.

The toll will be paid in yuan or cryptocurrency. Large crude oil tankers, known as “VLCCs,” have a carrying capacity of approximately 2 million barrels. At $1 per barrel, the toll alone would add about $2 million to their costs.

Ship passage requires prior review, necessitating the provision of ship registration and other information to Iran through an intermediary. After the review is completed and the agreed-upon toll is paid, the Iranian Islamic Revolutionary Guard Corps will issue a “permit code” and instruct the ship on the correct route.

Before the conflict between the United States and Israel with Iran, approximately 100 ships typically passed through the Strait of Hormuz daily, transporting about 20 million barrels of crude oil and petroleum products.

Ships were also required to fly the flag of a “friendly country” recognized by Iran. Bloomberg reported that the Pakistani government had proposed to a crude oil tanker company that they change their ship’s flag and registration to Pakistan before navigating the Strait of Hormuz.