Iran Establishes Persian Gulf Strait Authority to Regulate Commercial Passage through Strait of Hormuz
The Strait of Hormuz is no longer simply open or closed. Something potentially more consequential is happening. Iran is attempting to regulate it. A newly established Iranian body called the Persian Gulf Strait Authority has published rules governing commercial passage through the Strait and warned ships that violations can result in fines, detention or even confiscation.
Iran has also published a list of vessels it regards as non-compliant. And the reach of the system potentially extends beyond those ships themselves. Iran says vessels conducting ship-to-ship transfers or transshipments with listed vessels can also be added to its restricted list. Cargo owners have been instructed to consult the Iranian list before commencing Gulf voyages. Ships seeking removal must formally make their case to Iranian maritime authorities.
New Operating Model for Hormuz Emerges
The development did not appear from nowhere. Iran recently agreed to allow selected Iraqi oil tankers to pass through Hormuz after discussions between Baghdad and Tehran. That was significant because it demonstrated that the Strait was not completely impassable. Ships could move. But there was an important qualification. Iran decided which ships could move.
At the time, we argued that this could represent the beginning of a new operating model for Hormuz. The creation of the Persian Gulf Strait Authority strengthens that possibility. Iran is now attempting to institutionalise the process. A regulator requires rules.
Iranian Maritime Authority Imposes Conditions and Warns Cargo Owners
The new authority is behaving like a maritime regulator. It maintains a compliance list. It imposes conditions. It warns cargo owners. It provides a mechanism for vessels seeking removal from restrictions. It threatens penalties. Those penalties are not trivial. Iran says non-compliant ships may face fines, detention or confiscation.
That introduces another consideration for every company contemplating a Gulf voyage. The captain needs to know whether the route is physically safe. The shipowner needs to know whether the vessel can obtain insurance. The charterer needs to know whether the cargo can be delivered. The bank needs to know whether financing the transaction breaches sanctions. And now everybody may also need to consider whether Iran regards the vessel as compliant.
Commercial Complexity Accumulates
Iran is extending the rules beyond its own list. The ship-to-ship provision is particularly interesting. Ship-to-ship transfers have become an important mechanism for keeping petroleum moving during the Hormuz crisis. A vessel can transport crude from a dangerous area and transfer it to another tanker operating outside that zone.
Chinese state shipping companies have increasingly used arrangements outside the Gulf rather than sending their own tankers through the most dangerous chokepoints. Reuters reported last week that major Chinese state-controlled shipping companies had stopped sending vessels through Hormuz and Bab el-Mandeb and were instead using ship-to-ship transfers around Fujairah and Oman.
Iran‘s rules potentially reach into that system. Deal with the wrong ship and your own vessel may become restricted. That turns compliance into a network. This could make charting a course for international petroleum supply chains even more complicated, particularly for Australia, which relies heavily on those supply chains to meet its energy demands.
Original Article: Iran creates its own Hormuz authority — who now controls the world’s most important oil route? — Com