Full Breakdown
Oman's Fee Proposal for the Strait of Hormuz: Negotiations Amid U.S. Opposition
7/3/2026, 10:46:48 PM
Proposed Service Fees for the Strait of Hormuz
Iran and Oman are advancing a joint plan that would require commercial vessels to pay service-related fees for transiting the Strait of Hormuz. The proposal, delivered to the United States and several Western allies in early July 2026, distinguishes “service fees” from traditional tolls and cites the Strait of Malacca and Singapore as models. The plan would apply after the 60-day free-transit period stipulated in the U.S.–Iran memorandum of understanding (MoU) signed on 17 June 2026.
Background & Context
The February 28 2026 U.S.–Israel strike on Iran prompted Tehran to block the strait, halting roughly one-fifth of global oil flow. A subsequent MoU required toll-free passage for 60 days while the parties negotiate a permanent arrangement. Before the war, vessels crossed the strait without charge; the current discussions represent the first formal move toward monetisation.
Key Figures & Groups
- Badr bin Hamad Al Busaidi, Omani Foreign Minister – rejects mandatory tolls but supports voluntary service fees.
- Kazem Gharibabadi, Iranian Deputy Foreign Minister – insists any payments must be obligatory.
- Donald Trump, U.S. President – repeatedly called any fee “unacceptable” and threatened Oman with force.
- Scott Bessent, U.S. Treasury Secretary – urged rejection of Iranian attempts to disrupt commerce.
- Marco Rubio, U.S. Secretary of State – affirmed that international law forbids tolls on the strait.
- Andrew Leber, Carnegie Middle East Program scholar – notes Oman’s diplomatic “strategic ambiguity.”
Timeline of Negotiations
- 28 Feb 2026 – Iran blocks the strait following U.S.–Israel attack.
- 17 Jun 2026 – U.S.–Iran MoU signed, guaranteeing 60 days of free passage.
- 22 Jun 2026 – Iran and Oman hold inaugural joint committee meeting on strait governance.
- Early Jul 2026 – Oman submits a formal service-fee proposal to the United States and allies.
- Mid Jul 2026 – U.S. officials convey “concerns” and request technical clarification.
Data & Statistics
- The strait carries about 20 % of world oil and liquefied natural gas supplies.
- Pre-war traffic averaged ?130 vessels per day.
- After the interim deal, daily oil flows rose to >10 million barrels, slightly above half pre-war levels.
- The Malacca-Singapore model raised US$22 million over ten years (?US$2.2 million per year).
Why It Matters
Introducing fees could set a precedent for charging vessels in international straits, altering the legal framework of the United Nations Convention on the Law of the Sea (UNCLOS). It also raises market-risk questions for insurers, shipowners, and oil traders, while offering a potential funding source for navigation safety, pollution control, and emergency response.
Official Statements & Responses
The United States maintains that “no country is allowed to charge tolls or fees on an international waterway,” reiterating this stance through statements by President Trump, Secretary Bessent, and Secretary Rubio. Oman’s foreign ministry publicly denies support for mandatory tolls, emphasizing that any charges would be voluntary and linked to specific maritime services. Iranian officials assert that the payments are essential for “recognition of control” over the strait and should be mandatory.
Criticism & Opposition
Bahrain, the United Arab Emirates, and Saudi Arabia have all rejected the notion of any fees, citing international law. European governments, while acknowledging the likelihood of some fees, warn of legal implications and stress non-discrimination of vessels by nationality. Analysts highlight the risk that a fee regime could undermine the principle of transit passage.
Conflicting Reports & Gaps
Sources differ on whether the proposed payments are truly voluntary; Iranian officials describe them as obligatory, whereas Omani officials describe them as voluntary service contributions. Some reports state Oman has formally delivered a proposal; others note the proposal remains under review. The precise legal mechanism for fee collection—whether through the International Maritime Organization or a bilateral fund—remains undefined.
Verbatim Quotes
- “All nations should reject outright any efforts by Iran to disrupt the free flow of commerce,” — Scott Bessent, U.S. Treasury Secretary
- “No country is allowed to charge tolls or fees on an international waterway,” — Marco Rubio, U.S. Secretary of State
- “The strait is going to be open to everybody. Nobody is going to control it…it’s international waters,” — Donald Trump, U.S. President
- “There is no free service anywhere in the world,” — Mehdi Mohammadi, senior adviser to Iran’s lead negotiator
- “All we are saying is that perhaps we can benefit from some existing experiences, on a voluntary basis, between the countries concerned with this matter.” — Badr al-Busaidi, Omani Foreign Minister
What’s Next
U.S. negotiators are slated to meet Omani officials in the coming weeks to address technical concerns. Iran has warned it will proceed unilaterally if a joint framework is not reached. European states are preparing to discuss a possible multinational fund for navigation safety, while regional Gulf countries continue to monitor the proposal’s impact on oil logistics and legal norms.
