Iran’s Charging of Tolls in the Strait of Hormuz – A Strategic Master Stroke?: Just when you think that the United States’ war with Iran can enter a peaceful phase, it burns again like a prairie fire. This time, it is the downing of an American Apache attack helicopter and the resulting self-defense air strikes from the United States. The Iranians have proved to be tough negotiators, dismissing many offers from President Donald Trump’s negotiating team. One of the biggest hurdles for the Americans is fully opening the Strait of Hormuz for international commerce and oil deliveries to proceed.
Painful Toll Is Substantial
Capt. Andrew “Dojo” Olson, F-35 Demonstration Team pilot and commander performs aerial maneuvers during the Wings Over Houston Airshow Oct. 18, 2019, in Houston, Texas. The show featured performances from the U.S. Air Force Thunderbirds, Tora, Tora, Tora, and Oracle. (U.S. Air Force photo by Senior Airman Alexander Cook)
Tehran has other ideas and wants full control of the strait. The Iranians also have a plan in place to charge a $1.5 million to $2 million toll for ships to pass safely through the strategic waterway. Iran, ever creative in their quest to relieve the economic pain from a U.S. blockade on its shipping, will accept payment for the Hormuz toll in hard currency, goods, or cryptocurrency.
This Is Part of a More Comprehensive Plan to Controll the Strait of Hormuz
The Kurdistan 24 news outlet reported that Iran’s parliamentary Planning and Budget Commission has confirmed that the toll scheme began earlier this week. In April, lawmakers announced that the levies for passage would be part of a 12-point plan to manage the Strait of Hormuz.
Payment Can Be Made in Stable Coins
The toll policy will be administered by the Supreme National Security Council. The payment plan is unusual. The Iranians will take cash but will also accept the Tether stablecoin for tolls. This is a digital currency pegged to the U.S. dollar. Tehran will also accept goods and even barter.
“The use of cryptocurrency and barter mechanisms reflects the economic constraints facing both Iran and many of the shipping operators dealing with its toll system. For Iran, operating under heavy U.S. sanctions and a financial blockade, accepting Tether or goods offers a practical route to value extraction without relying on dollar-denominated banking channels. For shipping operators, particularly those from countries maintaining informal economic ties with Tehran, non-cash settlement may offer a degree of political insulation from the transactions,” according to Kurdistan 24.
Safe Transit Requires More Than Just a Payment
Ships must release information on ownership, cargo, and crew members before being granted safe passage, according to the New York Times.
The 187th Fighter Wing unveiled the new Alabama Air National Guard’s F-35 Lightning II fighter jet during an event at Dannelly Field, Alabama, today. The red tails are a historic tribute to the Tuskegee Red Tails, the famed WWII squadron, which lives on as the 100th Fighter Squadron within the wing. “The red tail you will see is a reminder to all that through excellence we will overcome any obstacle and threat regardless of gender, race, or religion, “ said Col. Brian Vaughn, the wing’s commander, during the ceremony. “We are all here for the same mission: to protect our nation, defend our constitution, and to form a more perfect union as the Tuskegee Airmen did.” (U.S. Air Force photo by Tech. Sgt. William Blankenship)
The United States finds this policy unacceptable, but international shipping companies are desperate to get their cargo and oil through the strait. The toll works out to about a dollar per gallon of crude. Brent crude oil is trading at $92.65 as of 11am on June 10. The tolls could send these prices higher.
The Toll Scheme Fits Into A Larger Negotiations Strategy
Keeping the Iranians from running the toll gambit for the foreseeable future is likely a bargaining tactic by Tehran. The political leadership needs help balancing the budget. But the real problem with Iran is the economy. Terrible inflation and joblessness have crippled the country, and it has entered into a period of stagflation. Tolls will not help much and could even lead to higher consumer prices as more money chases fewer goods.
However, the tool to hobble traffic in the strait is a smart move. It forces the international community to recognize that the war is affecting global commerce, and other countries may place more pressure on the Americans to negotiate a lasting truce and a just peace to end the Hormuz crisis.
Back to the Drawing Board
Now with tit-for-tat self-defense strikes from the Americans, the ceasefire has been violated, and no new negotiating tactics from the Trump diplomatic team can start immediately. The practice so far has relied on indirect messages and direct attempts at talks brokered by Pakistan.
Iran Is Playing Its Hand Well
Given the possibility of a prolonged period of levies charged for the safe transit of the strait, the United States must recognize that Iran still has cards to play that were unforeseen before the war started. The Americans figured that air strikes would bring the Iranian government to its knees. Iranian political leadership has other plans and likely wants to string out the peace process until Trump’s political party enters the midterm elections.
Iran Has the Passage of Time to Play With
So time is on Iran’s side. The use of a toll frustrates Trump’s team, who wanted to fashion a comprehensive peace deal by now. Finalizing this agreement would allow the strait to be considered a body of water for free, unimpeded commerce. Iran is not going to cooperate.
Thus, the toll is a masterstroke by Tehran that will likely require some difficult deal-making by the Americans. The Iranians would also like the United States to pay war reparations, which is anathema to Trump. The toll is also a signal to Washington that Iran has every intention of controlling the strait and punishing global commerce.
Punish the United States With High Inflation
Iran also hopes for high oil prices that keep inflation high in America. The new consumer price index is out, and it jumped 4.2 percent in May. Trump ran on reducing inflation, but now affordability in the United States is the number one issue facing voters that could punish Trump’s party in the midterm elections.
This toll then makes sense for Iran’s long-term negotiation strategy, which Trump and his diplomatic team seem unable to surmount. Look for Tehran to use this type of leverage in talks and hold out for direct payments from Washington before it stops charging ships for transiting the strait. Tehran may have already won an important battle in its overall war with America.
About the Author: Dr. Brent M. Eastwood
Author of now over 3,500 articles on defense issues, Brent M. Eastwood, PhD, is the author of Don’t Turn Your Back On the World: A Conservative Foreign Policy and Humans, Machines, and Data: Future Trends in Warfare, plus two other books. Brent was the founder and CEO of a tech firm that predicted world events using artificial intelligence. He served as a legislative fellow for US Senator Tim Scott and advised the senator on defense and foreign policy issues. He has taught at American University, George Washington University, and George Mason University. Brent is a former US Army Infantry officer. He can be followed on X @BMEastwood.
