Skip to content
Briefings are running a touch slower this week while we rebuild the foundations.See roadmap
Iran Conflict 2026
3JUN

Iran runs Hormuz as a favours system

4 min read
09:04UTC

Iraq cleared a 2-million-barrel VLCC and Pakistan secured passage for two Qatari LNG vessels through Iran in mid-May; Foreign Minister Abbas Araghchi told Mehr News the Strait is 'open to friendly nations, restrictions apply only to adversaries'.

ConflictAssessed
Key takeaway

Iraq and Pakistan got Hormuz transit through bilateral deals while Araghchi codified the friendly-nations doctrine on Mehr News.

Iraq negotiated bilateral Hormuz passage for a Very Large Crude Carrier of approximately 2 million barrels in mid-May and was in talks for additional tankers, while Pakistan secured transit for two Qatari LNG vessels through a Pakistan-Iran agreement, according to OilPrice.com reporting with Windward vessel-tracking corroboration 1. Neither Iraq nor Pakistan paid the Persian Gulf Strait Authority yuan tolls directly; Tehran accepted political engagement in lieu of yuan.

Returning from the BRICS foreign ministers meeting in New Delhi where his travel had been announced four days earlier , Iranian Foreign Minister Abbas Araghchi told Mehr News Agency: 'the strait of Hormuz is open to friendly nations, and restrictions apply only to adversaries' 2. The Mehr quotation is the doctrinal anchor; the Iraq and Pakistan operational deals are its implementation evidence. Araghchi's wording arrives alongside the 26-nation Western coalition paper, codifying Iran's counter-framework on the same chokepoint.

The bilateral track operationalises the Persian Gulf Strait Authority toll infrastructure established on 5 May and the $2m yuan per-ship toll Lloyd's List confirmed . Pakistan's status as the US-Iran MOU carrier gives Islamabad the diplomatic capital it spent on Qatari LNG passage, and China endorsed Pakistan's mediatory role on 13 May . The same Qatar that signed the 26-nation coalition paper received LNG through this bilateral track, an inconsistency Doha is paid to tolerate by both sides.

Counter-perspective: Western capitals will read the friendly-nations formulation as straightforward coercion of flag states; Tehran frames it as the legitimate exercise of littoral-state authority under UNCLOS Article 38(2), which permits coastal states to regulate transit passage in narrow conditions. The structural effect is identical either way: every flag state is now forced into a declared political position on Iran, making Hormuz a sorting mechanism rather than a freely-navigable strait .

Deep Analysis

In plain English

Iran is running the Strait of Hormuz like a club with a membership policy. Countries it considers friendly, including Iraq and Pakistan, can send their oil and gas tankers through without paying the official toll. Countries it considers enemies, primarily the US and Israel, cannot pass at all. This matters because Qatar, which has signed up to the Western naval coalition, quietly got two of its gas tankers through via Pakistan acting as a go-between. Tehran accepted Pakistan's political support for the gesture rather than money. The system means that access to the world's most important energy corridor now depends on which side of Iran's ally list a country sits on, not on international maritime law.

Deep Analysis
Root Causes

The PGSA's yuan-toll structure established on 5 May created a two-track system by design: the formal toll is the public architecture, but the bilateral deals are where Iran's actual leverage operates.

Tehran never ratified UNCLOS, meaning it has no obligation to observe the Article 38 transit-passage right. Its 2024 domestic maritime law revision, which classified 'hostile-linked vessels' as subject to IRGC inspection, gave Tehran a legal basis for the sorting system that the PGSA now operationalises.

Pakistan's role as the US-Iran MOU carrier gives Islamabad diplomatic capital it can spend on third-party passage deals. Iran accepts political engagement in lieu of yuan because political re-alignment has higher strategic value than toll revenue: a state that publicly negotiates passage through Tehran is implicitly acknowledging Iranian authority over the strait, which is the legal position Iran seeks to entrench before any ceasefire restores UNCLOS norms.

What could happen next?
  • Precedent

    Iran's codified 'friendly nations / adversaries' doctrine establishes a template for chokepoint states to operate selective-access regimes outside UNCLOS transit-passage rights, which may be studied by other states controlling strategic waterways.

    Long term · 0.69
  • Consequence

    Qatar receiving LNG passage via Pakistan while simultaneously signing the 26-nation coalition paper creates a documentary contradiction that Tehran can exploit in any ceasefire negotiation to challenge coalition cohesion.

    Short term · 0.81
  • Risk

    If the bilateral deal framework becomes the de facto norm before a ceasefire, resuming UNCLOS-based free transit may require a separate legal negotiation that did not exist before the conflict began.

    Medium term · 0.72
First Reported In

Update #99 · Two Hormuz papers; Washington on neither

Mehr News Agency· 16 May 2026
Read original
Causes and effects
This Event
Iran runs Hormuz as a favours system
Tehran has codified a parallel passage doctrine alongside the Persian Gulf Strait Authority toll system, converting Hormuz access from a yuan-priced fee into a declared political alignment with Iran.
Different Perspectives
Lloyd's of London underwriters
Lloyd's of London underwriters
Lloyd's held its Hormuz war-risk rate at $10-14 million per voyage; underwriters need a UN Security Council resolution or formal PGSA de-listing before repricing, not a Senate testimony. The PGSA remains on the SDN list under EO 13224, so any vessel transiting a nominally reopened strait still deals with a sanctioned counterparty.
Saudi Arabia and Gulf states
Saudi Arabia and Gulf states
Brent crude at $95-97 on 2-3 June reflects Gulf producers benefiting from the conflict premium; a genuine Hormuz deal would likely cut that premium by $10-15 per barrel. Riyadh's $87 per barrel budget breakeven means the current price is comfortable, reducing the Gulf's urgency to push for a rapid settlement.
China
China
OFAC's Nobitex designation leaves China's informal bilateral currency-swap lines with Iran as the CBI's remaining rial-defence mechanism; Chinese financial institutions face secondary-sanctions risk if they interact with successor wallets. Beijing's MOFCOM Blocking Rules protect mainland refineries from direct designation but do not shield informal swap-line counterparties.
Lebanon / Hezbollah
Lebanon / Hezbollah
Lebanon's Washington delegation demanded full Israeli withdrawal and the return of 1.2 million displaced; Hezbollah deployed an FPV drone that killed an Israeli soldier at Yohmor while talks ran, demonstrating it can impose costs even at Israel's deepest penetration point. Lebanon's government cannot deliver the Hezbollah disarmament guarantee Israel demands.
Israel / Benjamin Netanyahu
Israel / Benjamin Netanyahu
Israeli forces seized Beaufort Castle above the Litani on 1-2 June and advanced to within 10 km of the Zaharani river while ceasefire delegations sat in Washington; the advance ran entirely outside the Beirut-only truce Netanyahu accepted on 1 June. Each kilometre taken raises Israel's withdrawal price before any permanent text is signed.
Iran: Foreign Ministry and domestic population
Iran: Foreign Ministry and domestic population
Araghchi rang six capitals in 48 hours to reopen talks the SNSC had suspended, calling the IRGC line 'speculation'; at home, 37 political prisoners were executed since 19 March while students marched in Tehran, Mashhad and Hamadan. The diplomatic thaw has not eased the state's wartime repression tempo.