16JUL

Deal bans the Hormuz toll, licenses its replacement

3 min read

09:39UTC

The published memorandum bans tolls on Hormuz passage, then invokes UNCLOS Article 26(2) to recast the IRGC's toll body as an Iran-Oman provider of maritime services, with a charge-free window of only 60 days.

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Key takeaway

Iran agreed to drop the toll for 60 days and kept the legal machinery to switch it back on.

The Islamabad Memorandum of Understanding (MoU) text, published 17 June, bans "tolls" on Strait of Hormuz passage, then invokes the UN Convention on the Law of the Sea (UNCLOS), Article 26(2), to recast the charges as "maritime navigation services" ¹. That article forbids fees on innocent passage but permits charges for specific services rendered to a ship, so a renamed toll becomes lawful revenue. Management is handed jointly to Iran and Oman, and the charge-free window runs 60 days only.

The body collecting the money does not go away. The Persian Gulf Strait Authority (PGSA), the body Iran's Revolutionary Guard (IRGC) created on 5 May that levied up to $2 million per tanker , is not dissolved under the deal. It survives under a quieter label, the 60-day clock counting down to the charge's return. Iran asserted Hormuz sovereignty and collected paid passage as early as 15 June, foreshadowing the framing the text now formalises .

Iran's foreign minister Abbas Araghchi put it plainly: "Charges for services provided will be collected," naming navigation, environmental protection and insurance. Counting from a signing date of roughly 15-16 June, the fees could resume as early as mid-August. The party with the largest exposure to those fees, Saudi Arabia, holds no seat in the Iran-Oman mechanism that will set them.

Deep Analysis

In plain English

The ceasefire deal said Iran would stop charging ships to pass through the Strait of Hormuz. But it only said so for 60 days. After that, Iran can restart the charges under a different name. Instead of calling them 'tolls' , a word the deal bans , Iran will call them 'maritime navigation services fees', citing a section of international maritime law. Think of it as a motorway toll renamed a 'road maintenance contribution.' The underlying charge is the same; the label has changed. The legal argument is questionable, but Iran has 60 days before it matters. By then, the deal will either be extended or collapsed on other grounds.

What could happen next?

Precedent
The UNCLOS Article 26(2) rebranding, if unchallenged, sets a template for any state controlling a maritime chokepoint to levy transit charges under a services-fee framing that avoids the political label of 'toll.'
Medium term · Reported
Risk
Saudi Arabia's four idle supergiant fields face annual fee liability of up to $2 billion once the 60-day window closes, with no voice in the fee-setting mechanism. Riyadh's 26-day public silence on the MOU may break as the mid-August charge-resumption date approaches.
Medium term · Reported
Opportunity
The 60-day grace period gives shipping companies, P&I clubs, and international maritime lawyers a window to file UNCLOS arbitration claims testing the services-fee framing before charges resume.
Medium term · Suggested

Source Landscape

This story draws on centre-left-leaning sources from Qatar and Israel

Qatar

Israel

Primary parallel: Indonesia's 1982-1988 archipelagic-baselines dispute offers the closest structural precedent. Jakarta declared the seas between its islands as internal waters and charged foreign vessels for what it called 'navigational services', citing UNCLOS provisions designed for port approaches.

The international community , led by the US Navy , rejected the interpretation and maintained innocent passage claims by sending warships through without paying. Iran is attempting the same legal reclassification at a strategically far more consequential chokepoint.

Counter-parallel: The Panama Canal tolls demonstrate that fee-based transit through a chokepoint is not inherently illegal. The Canal Authority charges tolls that average $200,000 to $350,000 per large vessel without international legal challenge, because Panama's sovereignty over the canal zone is undisputed and the tolls are not discriminatory. Iran's position differs: the international community does not accept Iran's UNCLOS-based sovereignty claim over Hormuz transit passage.

The PGSA's pre-MoU charge was up to $2 million per tanker per transit. After the 60-day grace period expires , around 15 August 2026, calculated from the 15 June digital signing , Iran can resume charges under the 'maritime navigation services' label. At 2019 Hormuz transit volumes of approximately 21 million barrels per day across roughly 15 to 20 tanker transits daily, even a $500,000 flat fee would generate $250 million to $365 million per month for the Iran-Oman joint authority.

The Saudi supergiant offshore fields that have been idle since March , Safaniya, Zuluf, Marjan and Abu Safa, combined capacity approximately 2 to 2.5 million barrels per day , face an annual fee liability in the range of $1.8 to $2 billion once the 60-day window closes. Saudi Arabia has no seat in the Iran-Oman fee-setting mechanism and has not commented publicly for 26 consecutive days.

Consensus view: UNCLOS Article 26(2), the provision the MOU cites, was written to cover lighthouse maintenance fees and vessel-traffic-service charges in congested ports, not passage charges through a strategic international strait.

The provision reads: 'no charge may be levied upon foreign ships by reason only of their passage through the territorial sea', with an exception for 'specific services rendered to the ship.' Iran's interpretation stretches 'specific services' to cover a blanket Hormuz transit fee; no UNCLOS arbitration tribunal has sustained that reading.

Counter-view: Oman supplies the institutional cover that makes the joint Iran-Oman structure work. As a ratified UNCLOS party with no hostile relationship with international shipping, Oman changes the legal calculus: an Iran-Oman joint authority charging for vessel-traffic services would face a different challenge than an IRGC-only toll collector, because a complainant would need to sue both parties at once under two different UNCLOS domestic implementing frameworks.

Key tension: Whether the 60-day toll-free window produces any legal challenge before charges resume in mid-August, or whether it simply lets shipping normalise without triggering the arbitration that would test Iran's UNCLOS argument.

Sources:Al Jazeera·Times of Israel

Mentions:Abbas Araghchi →UN Convention on the Law of the Sea →Persian Gulf Strait Authority →Iran →Oman →Islamabad Memorandum of Understanding →Strait of Hormuz →Jakarta →Islamabad →Persian Gulf →US Navy →Indonesia →Panama →Tehran →Saudi Arabia →

First Reported In

Update #131 · Iran deal's first death tests the text

Al Jazeera· 18 Jun 2026

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Causes and effects

Caused by

Iran and US name Hormuz two ways

Iran's prior assertion of Hormuz sovereignty and paid passage foreshadowed the MOU's toll-ban workaround via UNCLOS Article 26(2).

Occurred 15 Jun 2026

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This Event

Deal bans the Hormuz toll, licenses its replacement

The same paragraph that bans the toll writes the legal route to bring it back.

Led to

Oil prices a Hormuz reopening that has not happened

The 60-day-only toll-free window with PGSA surviving means the Brent rally pricing a permanent reopening may reverse when the window closes.

Occurred 18 Jun 2026

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Iran builds an insurance toll for August

The UNCLOS Article 26(2) maritime-services framing established in the MOU text is the legal door Iran's PGSA walked through with the compulsory-insurance mandate.

Occurred 20 Jun 2026

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Different Perspectives

Indian refiners

Indian refiners kept lifting discounted Urals as the India/Baltic price split widened past $9-10 a barrel, a gap that only grows as GL X1's Iranian wind-down cuts an alternative discounted grade off the market by 17 July. Cheaper Russian feedstock is being locked in while it lasts.

Chinese refiners

Chinese refiners gain leverage as the Urals-Brent discount widens, since Beijing's state buyers already source discounted Russian barrels near the fiscal floor unaffected by Western insurance costs. A wider discount, if it holds past 23 July, lets them lock in cheaper term contracts regardless of the cap's outcome.

US money managers (CFTC-tracked)

Managed money trimmed WTI net length into the rally, positioning that reflects doubt the Hormuz premium survives without freight or war-risk confirmation. The Brent-WTI spread widening almost entirely on the Brent leg supports that scepticism about a broad-based repricing.

OPEC+ (Saudi-led subgroup)

Saudi Arabia is defending market share through a fourth straight 188kbd August hike even as OPEC's own July MOMR cut 2026 demand growth for the fourth consecutive month. At a $108-111 fiscal breakeven, every added barrel costs Riyadh revenue it cannot recoup, so the hike reads as a positioning signal, not a demand bet.

Greek shipping registries

Greece, backed by Cyprus and Malta, is pushing a three-month cap-freeze compromise against the Commission's freeze to January 2027 ahead of the 23 July vote. Athens' and Valletta's combined tanker registrations mean a shorter review gives their insurers more frequent chances to reprice risk on Russian cargoes.

Russia (Deputy PM Alexander Novak)

Novak extended the diesel export restriction to producers on 8 July, the first producer-binding curb of the war, protecting the domestic pump price ahead of any refinery repair timeline. Urals still trades below Russia's $59 budget floor even as Brent gained, so the ban trades export revenue for fiscal stability at home.