Iran reportedly letting ships through the Strait of Hormuz — for a price | About That

Is this the shortest, most expensive detour in the world? Normally, Middle East oil shipping goes through here, but Iran blocked that route, and roughly a fifth of the world's oil trade along with it. But bit by bit, ships are beginning to trickle through here, squeezing through this tiny waterway closer to Iran's coastline. The cost of that little side slip?

According to one shipping intelligence firm, one fee reported to have been around $2 million. It's a toll. Iran is saying, you go through the Strait of Hormuz, we attack you. You go through our little detour, you pay the toll, you get through safely. If the regime gets what it reportedly wants, which is to officialize this new source of revenue, the blue sky math of it looks pretty good for them.

Figure in a typical year, the number of tankers that transit the Strait of Hormuz is somewhere between 30 and 50,000. Let's take the low end of that and apply a $2 million toll to each ship. That's $60 billion of new revenue,

or what would be almost a fifth of Iran's GDP last year. Now, I'm not saying the whole world is suddenly going to just agree to pay these fees to get going, but we can also understand why they're so desperate that they might want to. Because time is money. The biggest oil tankers are called very large and ultra large crude carriers. And just to give you a sense of how big these ships really are, a VLCC,

330 meters long, that's as long as a 100-story building is tall. And that's the second biggest ship. It can carry the equivalent of about 2 million barrels of oil. So you've got a 2 million dollar charge on 2 million barrels of oil. That's a dollar a barrel for a commodity that these days can fetch upwards of $100 a barrel. So this toll represents Iran taking a roughly 1% cut of what all that oil stuck in the Strait is currently worth. So you tell me, you have a $100 million ship

carrying $200 million worth of oil, and you'd like to get it moving. Maybe a $2 million fee is worth it. Except, of course, what a precedent to set because a toll here would be illegal.

Well, the whole concept of a toll is illegal in the first place. That is not something that is allowed under international law.

Not allowed because the UN considers the Strait of Hormuz an international strait, which belongs to everyone. But tell that to Iran, which may or may not charge more tolls in the future. Either way, their message to the world has been very clear. tolls in the future. Either way, their message to the world has been very clear. We have leverage and we'll use it.