Tehran : The Strait of Hormuz, through which 20% of the world’s oil and gas passes, is neither fully open nor formally shut. It’s an interesting paradox, isn’t it? Instead, amid the Iran war, shipping through the world’s most critical oil chokepoint has shrunk to a trickle, become more costly, and become far more uncertain.
Iran, a coastal state bordering the Strait of Hormuz, effectively controls the crucial shipping route. The strait is too narrow (33 km) for ships to avoid navigating waters claimed by Iran. It is a leverage Iran has used previously as well. This time, the impact has been more stark, with the conflict, now in its fourth week, seeing a major shift. Iran has moved to tighten its grip on Hormuz, not by closing it but by reopening it on its own terms and forcing “non-enemy” countries to pay for passage of their ships.
Iran has attacked around 20 ships that have attempted to cross the strait without its permission. Tehran has repeatedly warned that only its “enemies and their allies” would be attacked. However, it has not clearly defined which countries fall under that category. According to analysis firm Kpler, just 138 ships crossed the narrow waterway so far in March, including 87 oil and gas tankers. That’s just 5-6 ships per day. It amounts to a whopping 95% drop in crossings since the war began.
Presently, some 2,000 ships are stuck in the waters near the Strait of Hormuz, according to the International Maritime Organisation (IMO). Now, a very limited number of countries have managed to get their tankers through the strait. Sanctioned tankers and shadow-fleet vessels, usually uninsured, now make up the overwhelming majority of shipping through Hormuz. Most of the oil since February 28 has headed for Asia, especially China, the world’s top crude importer and among the few countries that have condemned the strikes on Iran.
An analysis by Lloyd’s has shown that a third of the ships were owned or had connections to Iran. Greek and Chinese carriers come next. Six India-bound tankers have transited the strait. Around 20 India-flagged vessels, with 540 Indian seafarers, are waiting to cross the strait. Pakistani and Turkish vessels have also been allowed to pass by Iran. The gate is not open for all. Drones, missiles, and underwater mines present a serious challenge. Geography is on Iran’s side.
Presently, Iranian authorities are reportedly handling requests from countries on a case-by-case basis. There is also a ‘Tehran toll booth’ in place, with reports in foreign media saying that Iran was charging as much as $2 million (Rs 18 crore) to safely transit the strait. It is similar to how Egypt controls the Suez Canal. However, Iran has denied the report.
If a tanker wants to cross the strait, the operator has to first reach out to middlemen linked to the IRGC and submit documents like ship ID, ownership, cargo details, destination and crew list for vetting. These are then carefully reviewed by IRGC authorities. Cargo with oil is given priority. The vessel then undergoes a layered scrutiny in Hormozgan province.
The Strait of Hormuz remains open. Instead, the risk of passage through the route has risen massively. The risk turned into a pain point for insurance markets. As tensions escalated, so did war-risk premiums, which are now seeing rates between 3-7.5%.
Read Also : Shutdown Of US Bases, Hormuz Transit Fees : Iran Sets Tough Terms In Response To Trump’s 15-Point Peace Plan
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