Iran has proposed a new authority to regulate shipping through the Strait of Hormuz using permits and transit tolls.
The strait handles nearly 20% of global oil trade, making the move strategically important for global energy markets.
The US and its allies oppose any restrictions on passage, while Iran says it alone is responsible for securing the waterway.
Iran Forms New Hormuz Transit Authority: How It Works, Why It Matters
The narrow waterway controls approximately 20% of the global oil trade, making it a critical chokepoint in the global energy supply chain
Iran Forms New Hormuz Transit Authority: How It Works, Why It Matters
Summary
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In a bid to formalise its control over the Strait of Hormuz, Iran has floated a new body called the Persian Gulf Strait Authority (PGSA) on May 5. It will introduce a permit system which would allow Iran to regulate and monetise passage through one of the world’s most important sea routes.
The narrow waterway controls approximately 20% of the global oil trade, making it a critical chokepoint in the global energy supply chain. This came in the backdrop of multiple failed attempts between the US and Iran to achieve peace in West Asia.
How PGSA Work?
The PGSA has been introduced by Iran as an official body that will govern and supervise maritime traffic through the strait. It has already announced a framework which all ships requesting transit must follow. This entails obtaining transit authorisation as well as payment of tolls to secure passage.
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According to Lloyd’s list, a shipping journal, "Ships are required to submit detailed records of ownership, insurance, crew details and intended transit route".
According to reports by Iranian state media, ships intending to transit the strait would receive communication through email from the officials.
Why the Move Matters
Hormuz gives Iran an extremely potent bargaining chip in regional and global geopolitics.
Already, army official Mohammad Akraminia told Iran’s official IRNA news agency that countries complying with American sanctions “will certainly face difficulties crossing the strait.” The Iranian regime could thus use unrestricted passage through the Strait as a negotiation tool against the West and its allies to extract a better deal from them.
The earlier disruption across the strait led to an unprecedented oil shock which led to sharp price increases around the world. This new checkpoint-system that Iran is using could allow for smoother transit of ships in the short term but could be the reason for future uncertainty as Iran would retain the ability to close the strait whenever it chooses to.
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Global Response
The US and its allies have repeatedly called for unrestricted passage through the Strait of Hormuz.
According to Moneycontrol the US and Bahrain reportedly drafted a United Nations resolution calling on Iran to halt restrictions on shipping through Hormuz. Russia would reportedly veto the resolution.
The UK and France are also hosting a multinational meeting of defence ministers on Tuesday to discuss military plans on restoring unhindered passage through the Strait of Hormuz.
Iran has condemned this move and its deputy foreign minister Kazem Gharibabadi maintained that only the Islamic Republic can establish security in this strait.