Why Trump's Backtracked Strait of Hormuz Fee Would Have Been a Disaster
Newsweek · C · trust 57/100
0 Share Newsweek is a Trust Project member See more of our trusted coverage when you search. Prefer Newsweek on Google to see more of our trusted coverage when you search. President Donald Trump threatened to slap a 20 percent fee on cargo making its way through the vital Strait of Hormuz trade route—proposing to do precisely what his administration had opposed for months.
But just a day later, he backtracked. Instead, he said on Tuesday, the U.S. will make "massive" trade and investment deals with its allies in the Gulf.
"America is WINNING again," he said in a post to his Truth Social platform.
Many observers are unsurprised by the sudden U-turn, after shipping firms and global organizations quickly argued that a fee system would undercut the rules ships have long obeyed in international waters, as well as maritime law, when traffic through the area still hasn't return to pre-war levels.
A U.S.-imposed tax in the strait would have opened a "dangerous Pandora's box," said Petras Katinas of the Royal United Services Institute, a U.K.-based defense think tank.
So, why did he suggest it in the first place?
Trump has framed the slew of future deals with Gulf states as a victory for American workers, heralding new factories and jobs after months of soaring fuel prices caused by the closure of the Strait of Hormuz and at least tens of billions of dollars funneled into the war.
Americans, Trump said, will be "winning like never before."
"Everyone wants to get back to business as usual," Katinas told Newsweek .
But there was a clear economic motivation behind the suggestion of U.S.-administered tolls in the first place, too.
The Baltic and International Maritime Council (BIMCO), the world's largest shipping organization, said the proposed fees could have had a "substantial" financial impact on the shipping industry, with the amount payable to the U.S. reaching $27 million per voyage for the biggest vessels carrying crude oil.
Related Story A Return to ‘Hot War?’ Where the US and Iran Could Escalate Fighting Container ships could have stared down a fee of between $65 million and $260 million per trip, BIMCO told Newsweek .
While some cargo companies and ship operators may have absorbed the new costs, it's likely most of the increase would have been paid for by consumers, the organization said.
Man-made waterways like the Suez or Panama canals often lawfully impose tolls, generating billions of dollars in revenue for the countries controlling and maintaining them from ships eager to cut down their travel time.
But it would be "fundamentally wrong" to charge tolls for ships traveling in international waters, no matter which country would have collected the revenue, German shipping giant Hapag-Lloyd said.
"Tolls for infrastructure such as the Suez Canal or Panama Canal are different, because they reflect major infrastructure investments," the firm said in a statement carried by Reuters. "That is not the case in the Strait of Hormuz."
Under the United Nations' Convention on the Law of the Sea (UNCLOS), which is an international treaty for maritime activity in international waters, all ships have the right to pass through waterways like the Strait of Hormuz without being "impeded."
Sometimes exceptions can be made when a state looks out onto the waterway and is separated from part of its territory, like an island, by the strait.
Although the UNCLOS doesn't specifically mention levying fees on ships in international waters, it's generally thought to contravene international law. The U.S. is not officially a party to UNCLOS but has historically followed its provisions.
The U.N.'s shipping agency, the International Maritime Organization, said on Monday that "the right of transit passage through straits used for international navigation should not be threatened, impeded, denied, hampered, impaired or suspended."
"It is not legal in any sense," said Christian le Miere, the chief executive of strategic advisory company Arcipel and an honorary fellow at the U.K.-based Council on Geostrategy think tank, who previously served as an adviser to the government in Abu Dhabi.
"A toll is clearly impeded transit," he told Newsweek .
Trump has often tied the U.S. relationship with its allies to economics, and this is no exception. U.S. protection for ships in the strait, he said on Monday, should come with a "fair" price.
That was seen by some analysts as a way for the U.S. to criticize its NATO allies, which have refused to become embroiled in the Iran war despite pressure from Washington, as well as easing some of the financial burden of the 4 1/2-month war.
"This tracks with how he views NATO," said Jim Townsend, a former Pentagon official. "It’s like a protection racket: He agrees to protect the allies, but he wants things in return."
More than 40 countries, including the U.K. and Canada, had said they were willing to help the U.S. secure the strait but later clarified they would do so only once fighting between the U.S. and Iran stopped.
The U.S. has tried, unsuccessfully, to fully reopen the Strait of Hormuz since Tehran started targeting ships in retaliation for the U.S. and Israel launching their initial attacks on Iran on February 28.
The attacks on commercial vessels have wreaked havoc with global markets, oil prices, travel routes and deliveries of vital supplies like aid to developing countries. One-fifth of the world's oil and gas usually passes through the Strait of Hormuz.
A fragile memorandum of understanding, signed by the U.S. and Iran in June committed Tehran to making "its best efforts for the safe passage of commercial vessels with no charge for 60 days" while a more permanent peace deal is negotiated.
But the deal appeared on the cusp of collapsing on Tuesday after the U.S. fired on Iran for a third day in a row, spending five hours hitting at least six sites. Iran said it responded by targeting U.S. military facilities in Jordan and Bahrain, as well as two tankers…
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