TEHRAN – Secretary of State Marco Rubio drew a line in June that left no ambiguity. “It’s an international waterway,” Rubio said. “No country is allowed to charge tolls or fees on an international waterway.” The statement, reported by Al Jazeera, appeared to close the question. Iran had already found its way around it.
“We are not seeking to levy transit tolls,” Iranian Foreign Ministry Spokesman Esmail Baghaei had said earlier in June. “However, fees will be charged in exchange for the services that are provided.”
The Islamabad MoU, signed June 17, prohibits “tolls.” It says nothing about “service fees.” Tehran built its response to Rubio around that gap before Rubio spoke.
Foreign Minister Abbas Araghchi framed it the same way on June 14: the charges are “for services rendered” – navigation coordination, corridor management through the Persian Gulf Shore Authority, and security escort through the Hormuz northern approach. The IRGC has been operating that corridor since mid-March, charging around $1.5 to $2 million per vessel, routing ships through an arrangement anchored at Qeshm and Larak. The parliament’s National Security Commission approved a bill that would write “service fees” – not “tolls” – into domestic statute. By the time Rubio called an international waterway immune to any charges, Iran had already built the legal architecture underneath a different term.
The distinction is not merely rhetorical. It traces what international maritime law permits. The United Nations Convention on the Law of the Sea, Article 26, bars coastal states from imposing charges on ships exercising the right of transit passage through international straits. Paragraph two of the same article creates an exception: charges may be levied for “specific services rendered to the ship.” Iran’s “service fee” language maps precisely onto that exception. Navigation assistance, corridor coordination, environmental protection – these are the services Baghaei’s statement named.
Iran is not a party to UNCLOS. That turns out to be an asset. A state that has ratified the convention is bound by Article 26’s transit passage protections in full. Iran, which signed but never ratified, can invoke the persistent objector doctrine – the principle that a state which consistently rejected a norm during its formation is not bound by the customary international law that emerged from it. Iran has maintained that the Strait of Hormuz falls within its sovereign waters since the 1970s. That claim, combined with its UNCLOS non-ratification, gives Tehran legal footing for a charging regime that Article 26 would otherwise prohibit for ratifying states.
The counterargument is blunt. James R. Holmes, who holds the J.C. Wylie Chair in Maritime Strategy at the Naval War College, has said there is “no provision in international law for a coastal state charging for passage through a natural waterway, whether you call it a toll or a fee or whatever.” Holmes’s reading is that the renaming is a political maneuver, not a legal transformation – the substance of the charge is identical regardless of what the invoice says.
The Malacca Strait offers the model Iran has been invoking in discussions with Oman. Since 2007, Malaysia, Indonesia, and Singapore have collected voluntary contributions from shipping interests for navigation safety, hydrographic surveys, and environmental protection in the strait, channeled through a fund the Nippon Foundation helps administer. No vessel is turned back for non-payment. IMO Secretary General Arsenio Dominguez has acknowledged that the voluntary Malacca model “could work” for Hormuz, while making clear that mandatory charges would violate the freedom of navigation principles the IMO endorses.
Oman, which co-signed the Islamabad MoU and has been mediating the Hormuz corridor arrangement with Iran, is insisting that any payment mechanism be voluntary – the Malacca structure Tehran is citing publicly. Tehran’s internal position is that the charges are compulsory. The mine-clearance timeline and the fee-versus-toll semantic dispute are running on parallel tracks, both involving gaps between what the MoU describes and what the facts on the ground will allow. Neither has been addressed in any Doha communiqué.
Rubio’s formulation – that no country may charge “tolls or fees” on an international waterway – goes further than UNCLOS itself, which does permit fees for specific services rendered. The strength of his position lies not in the treaty text but in the US refusal to recognize Iran’s sovereign water claim over the strait. Under that reading, no charging regime in any form is acceptable, because the legal premise – Iranian sovereignty over the corridor – is not accepted. The fee versus toll distinction is irrelevant if the underlying authority to charge anything at all is contested.
That is the core conflict. Iran is not arguing that Article 26 permits service fees while prohibiting tolls. It is arguing that Article 26 does not apply to it at all – because Iran never ratified UNCLOS – and that its domestic legal regime, once the Majlis bill passes into statute, is the applicable law in Iranian waters. The fee system then becomes not a workaround to a convention Iran didn’t sign but a function of Iranian law in territory Iran claims as sovereign.
The $40 billion annual revenue figure circulating in Iranian parliamentary discussions reflects the compulsory version of that system, applied to every commercial vessel transiting the strait at rates denominated in rial. The MoU’s prohibition on “tolls” cannot reach a number calculated under a different legal category. Whether Washington can accept any mandatory charge – called a service fee, a navigation contribution, a corridor management levy – is a question the next Doha round will need to answer. The MoU’s drafters left the word “fee” entirely unaddressed. That gap is now the negotiation.
