Will Higher Hormuz Fees Push Up Prices Worldwide?

**SPEAKER_1** (0:00)
Ryan, it's good of you to join us.

**Ryan Bohl** (0:01)
Yeah, well, thank you for having me.

**SPEAKER_1** (0:03)
You're very welcome. Let's start here. How serious is the proposal to charge ships for passage through the Strait of Hormuz, Ryan?

**Ryan Bohl** (0:13)
Yeah, and it depends on who you're asking, and who you're talking about. From the Iranian perspective, this is a serious proposal. That's something that they've already taken some tolls here and there in the course of the ceasefire.
It's something that is in their long-term interests, because remember, for Iran, one of the biggest problems that they've got post-war is their economic challenge. They have a reconstruction bill, they've had long-term sanctions from the United States. One of their core goals of using Hormuz's leverage is to break out of that economic isolation. But they have a tricky approach to this, which is that one path is to go through the Americans and appease them, and to gain sanctions relief from Washington, which would be one of the more straightforward ways for Iran to reintegrate itself into the global economy and rebuild itself and overcome its economic challenges. But the problem is they don't trust the Americans, and they're assuming that the US will at some point or another, either under this administration or the next, reimpose sanctions regardless of the concessions that they offer to Washington. So the other option is to force concessions out of the Americans rather than appeasing them. Use your leverage over something like Hormuz to force those concessions to get out of this economic isolation campaign. And then there's a corollary to that, which is to use the force that you've got with the leverage you've got for this moment to extract something like tolls out of Hormuz directly to make real cash right now rather than waiting for the Americans to offer concessions later on. So from the Iranian perspective, it's quite serious. And I think that they're going to try to do this as long as it is tolerated by the international community and more importantly doesn't result in military action from the United States, especially expansive military action against the Islamic Republic. And on the Gulf Arab side, on the other hand, it can be broken into two camps, the countries that really don't want it and the countries that will go along with it because they don't see any other choice.
The countries that really don't want this, Kuwait, Bahrain, Qatar, all of them are locked into the Arabian Gulf. They have no other option other than to go through Hormuz for the majority of their exports and imports. They don't want a toll because that toll will push up prices for them. And they don't have bypasses over Hormuz that are actionable anytime soon. And there's lots of reasons we can say that Kuwait's not going to build a pipeline through Saudi in a reasonable timeframe. But essentially the short story is they do not want to have to pay this extra fee. It's essentially a tax on their existence because of their geography. And then there's Oman, which is entertaining these talks with the Iranians, but is trying to frame it in a way where it's unimpactful, either by delaying it or by making it voluntary, which is what I think Muscat is currently trying to do. Make it a voluntary fee, something for environmentalism or safety and navigation, something like that that companies can choose to opt into.
That's not exactly what the Iranians want, but the Iranians are more about the right to control Hormuz rather than necessarily the dollars and cents, at least at the moment.

**SPEAKER_1** (3:19)
It's a control game, isn't it? I mean, these tolls are essentially or apparently service fees, but, you know, from the US perspective, they are unacceptable. From an intelligence perspective, is this just a semantic game, or is there a genuine difference in how these charges could be applied?

**Ryan Bohl** (3:40)
I think that there is a difference in that, if you go between a formal mechanism with some sort of multilateral institution, like what the Iranians are calling the Persian Gulf authority, the Strait authorities, what they're trying to set up, that would have some sort of force of international law, some sort of legitimacy through a diplomatic deal with the United States that goes beyond its current memorandum of understanding, that would have a weight that I think companies and insurers would be unable to ignore. Nobody could do what we're currently seeing, where they're turning off the transponders and bolting Hormuz and getting through by the skin of their teeth and just taking that risk. I don't think that would be possible if the Iranians get what they want, which is a formal mechanism for governing Hormuz going forward, similar to what we see with the Straits of Malacca, with the way that the Suez and Panama canals work. It becomes the cost of doing business and it becomes permanent.