Mandatory insurance scheme raises toll fears in shipping industry; war risk premiums still 27 times peacetime levels; vessel traffic at 20% of normal

Iran, which signed a ceasefire agreement with the United States, has signaled it may reimpose transit fees on the Strait of Hormuz once follow-up negotiations conclude after a 60-day period. [AFP]
Iran, which signed a ceasefire agreement with the United States, has signaled it may reimpose transit fees on the Strait of Hormuz once follow-up negotiations conclude after a 60-day period. [AFP]

By Seo Ji-yeon, The Herald Business

The Strait of Hormuz has reopened following a ceasefire memorandum of understanding between the United States and Iran, but anxiety in the shipping industry persists. Iran has signaled it may impose various transit fees on vessels after a 60-day grace period, fueling concern that a new toll system could effectively take hold.

According to the Financial Times on Thursday, a document circulated to the shipping industry under the name of the Persian Gulf Strait Authority (PGSA) states that "all vessels must carry a valid insurance policy approved by the PGSA."

The PGSA is a body the Iranian government established following the ceasefire agreement with the United States.

The document also states that the insurance will be provided free of charge for now, but that the authority reserves the right to introduce insurance fees in the future. The shipping industry has interpreted this as a preliminary move toward imposing transit charges.

The Islamabad MOU signed by the United States and Iran stipulates that Iran will keep the Strait of Hormuz open at prewar levels for 60 days and will not charge separate usage fees during that period.

Iranian authorities have indicated, however, that they may introduce a new management framework once the grace period ends.

An Iranian official told the FT that no fees would be charged during the 60-day period, but added that "afterward, Iran, Oman and regional countries will consult to establish a new transit framework, which will likely include fees for safe passage and the provision of services."

Oman is also reportedly considering imposing separate charges under the guise of environmental protection, navigational safety management and pilotage services.

The shipping industry's heightened sensitivity stems from transit conditions that have not normalized despite the end of the war.

According to the Strait of Hormuz Monitor, 26 vessels passed through the strait in the most recent 24-hour period, representing 43 percent of the peacetime average. At one point, daily traffic fell to as few as 10 vessels, less than 20 percent of normal cargo volumes.

Cargo volume measured in deadweight tonnage has also remained at just 18 to 20 percent of peacetime levels.

War risk insurance premiums remain elevated. The current war risk premium rate stands at 4 percent, roughly 27 times the prewar average of 0.15 percent.

Iran's military control over the strait also continues.

The PGSA has required vessels to submit transit applications at least 48 hours in advance and to obtain prior approval for designated routes and passage times. Ships must follow Iranian guidance to avoid mine-risk areas.

Warning broadcasts have also been transmitted to some vessels.

The FT reported that Iran fired warning shots at vessels near the Strait of Hormuz on Thursday and declared that "the strait remains closed until Israel's withdrawal from Lebanon and the full lifting of the US maritime blockade are implemented."

During the war, Iran had even considered imposing a cryptocurrency transit fee of $2 million per vessel.


sjy@heraldcorp.com