Iran's Hormuz Tolls vs Suez and Panama: The Legal Asymmetry Washington Prefers to Ignore

Iran's demand for up to $2 million per vessel to transit the Strait of Hormuz has drawn condemnation from Western governments, but the legal grounds for that condemnation rest on a distinction that is more fragile than the anger suggests.

By Moemedi Michael Poncanamena5-minute read28 May 2026☆ Save ↗ Share ⎙ Print

When Iranian officials began signalling charges of up to $2 million per vessel for transit through the Strait of Hormuz earlier this year, the response from Western capitals was swift and categoric. Shipping executives and their insurers called it an imposition; the State Department called it a violation of freedom of navigation; maritime law professors called it without precedent. What those condemnations share is a selective reading of international waterway law that the infrastructure argument makes harder to sustain.

The Strait of Hormuz carries roughly a fifth of the world's oil and a fifth of global LNG trade — a volume that makes the Suez Canal and Panama Canal look modest by comparison. Unlike those two waterways, however, Iran does not maintain a lock system, dredge a canal, or provide the kind of engineered bottleneck that justifies a toll. What it does control, as a matter of geography, is the narrowest point of a passage that global trade cannot reroute around. That asymmetry — between what Iran charges for and what Egypt and Panama charge for — is at the heart of the current dispute, and the case for Iran's approach is more structurally coherent than the official Western line acknowledges.

The Infrastructure Precedent

The Suez Canal Authority charges fees that reflect the operational cost of a maintained waterway: a lockless, sea-level canal that requires continuous dredging, navigation aids, and a dedicated traffic management system. The canal's profitability is documented — Egypt earned roughly $9.4 billion in transit revenues in the fiscal year ending June 2024, a figure that has risen steadily over the past decade. The justification for those charges rests on the provision of a service and the maintenance of an asset. Panama operates under a similar logic, albeit through a lock system that demands more active engineering intervention.

The critical distinction, legal scholars have noted, is that both waterways exist because someone dug them. They are artificial corridors maintained by state actors who have an ownership claim grounded in construction and operational expenditure. Iran's claim to Hormuz is different in kind: it is based on sovereignty over territory adjacent to an international waterway, not on the creation or maintenance of the waterway itself.

That distinction matters to Washington, but it matters less to the shipping industry, which operates on a cost-benefit calculation rather than a legal classification. For a tanker operator weighing a transit fee against the cost of a months-long rerouting via the Cape of Good Hope, the legal theory behind the charge is secondary to the number on the invoice.

Trump's Sovereignty Paradox

The geopolitical layer complicates the picture further. Reporting by Middle East Eye on 28 May 2026 noted that President Trump stated, as part of negotiations with Iran over a potential nuclear deal, that the United States does not want to see the Strait of Hormuz controlled by any single country. The framing is consistent with Washington's long-standing position that Hormuz must remain an open international waterway — a principle the US Navy has enforced, with varying degrees of justification, since the 1980s.

But the paradox in Trump's position is worth examining: Washington objects to Iran controlling Hormuz transit, while simultaneously arguing that Egypt has a legitimate right to charge Suez tolls and Panama has a legitimate right to charge Canal tolls. The distinction rests on a legal framework that treats sovereignty-based charging differently from infrastructure-based charging — a framework that serves the interests of states with maintained waterways but is less convenient for states whose geographical position alone creates leverage.

Iranian officials have noted, with some consistency, that their position is not without precedent. Several states have asserted varying degrees of control or revenue extraction over chokepoints adjacent to their territory. The question of what constitutes a legitimate charge versus an obstruction is answered differently depending on who is asking and which international body is doing the answering.

The Broader Chokepoint Politics

The Hormuz dispute sits inside a larger pattern of waterway politics that has intensified over the past decade. Russia has explored tolling structures for the Northern Sea Route as ice retreat opens new transit possibilities. China has invested heavily in port infrastructure across the Indian Ocean that gives it leverage at multiple points along shipping lanes it does not own. The Suez Canal Authority's revenue model has become a matter of Egyptian fiscal policy — the canal is a sovereign asset managed for national benefit, not a global commons maintained at cost.

What this pattern suggests is that the norms governing waterway charges are less settled than Western governments prefer. The legal architecture around the 1982 UN Convention on the Law of the Sea offers guidance but not resolution; it distinguishes between innocent passage and commercial tolling without resolving the sovereign charging question cleanly. States with infrastructure assert the right to charge; states with geography assert the right to do the same. The difference is political, not legal.

The shipping industry has absorbed this reality pragmatically. Insurance premiums, route planning, and fuel costs are calculated against a backdrop of variable tolls and transit risks. What matters to operators is predictability, not principle. Iran's fee, if it is applied consistently, becomes another line item in a cost structure that already includes war risk surcharges, piracy premiums, and the occasional Cape detour when the Red Sea corridor closes.

What Comes Next

The trajectory of the Hormuz toll question depends on two variables: whether a US-Iran nuclear agreement progresses, and whether the fee is actually implemented in a form that disrupts transit volumes. Iranian officials have made the demand; they have not yet collected at scale. The gap between signalling and enforcement is where the dispute will be resolved — through diplomatic pressure, commercial negotiation, or the kind of quiet accommodation that shipping executives prefer to public dispute.

For Washington, the problem is not Iran's fee itself but the precedent it would set: that geography alone justifies a charge, and that sovereignty over adjacent territory can be converted into maritime revenue. For Tehran, the calculation is different: a strait that carries a fifth of the world's oil is a legitimate bargaining chip in negotiations where Iran's nuclear programme and sanctions relief are the foreground issues.

What the current framing obscures is that both sides are operating within a system of norms that was written to suit a different era of maritime power. The Suez and Panama analogies work for states that built waterways; they do not cleanly apply to states that inherited strategic geography. Until that asymmetry is addressed — in a treaty revision, a regional agreement, or a bilateral understanding between Washington and Tehran — the Hormuz question will remain a live dispute, managed but not resolved.

This publication's wire coverage of the Hormuz fee debate foregrounded the infrastructure-versus-sovereignty distinction that most Western reporting submerged. The framing in competing outlets concentrated on the $2 million per-vessel figure and the US condemnation; less attention was given to the structural asymmetry that makes Iran's case legally, if not diplomatically, coherent.