A fee by any other name
On May 19, 2026, the Islamic Revolutionary Guard Corps Navy began broadcasting a new message on VHF Channel 16 to every commercial vessel approaching the Strait of Hormuz. The message was simple. Pay a "navigational service fee" or turn around. The fee for a loaded VLCC, a very large crude carrier, was set at $2 million. For smaller tankers and bulk carriers, the demand ranged from $500,000 to $1.2 million depending on tonnage and cargo value.
Within 48 hours, at least three vessels had paid. The payments were not made in dollars. Iran demanded settlement in Chinese yuan or, in at least one confirmed case, cryptocurrency routed through a Dubai-based exchange. A fourth vessel, the MT Crystal Horizon, a Suezmax tanker flagged in Marshall Islands and carrying Qatar liquefied natural gas, was denied passage for three days while its owners negotiated. It eventually paid $1.4 million in yuan on May 22.
I have been covering maritime fees and tolls for eleven years. I have never seen anything like this. The Suez Canal, which is operated by a sovereign government and charges some of the highest transit fees in the world, asks roughly $300,000 to $500,000 for a fully laden tanker to pass through. That fee buys you a pilot, a convoy system, dredged channels, and a canal authority that has been managing traffic since 1869. What Iran is offering for its $2 million is, as far as I can tell, nothing except the absence of an IRGC speedboat with a heavy machine gun pointed at your bridge.
What Iran claims it is selling
The IRGC's announcement, relayed through the Tasnim News Agency on May 20, described the charge as compensation for "safe navigation, pilotage assistance, and traffic coordination services" in the strait. The phrasing is deliberate. If you squint hard enough, it almost sounds like a legitimate port fee. Ports all over the world charge for pilotage and traffic management. The Port of Rotterdam charges around $15,000 for pilotage on a large vessel. Singapore charges similar rates for its traffic separation scheme.
The difference is that Rotterdam and Singapore are providing actual services. They have pilots who board your ship. They have vessel traffic services with radar coverage. They have tugboats and rescue coordination. Iran is providing none of these things. The IRGC is not dispatching pilots. There is no improved traffic management. The "service" is the absence of interception. You pay, and they let you pass. You do not pay, and a Boghammar speedboat with a .50 caliber mount pulls alongside.
At least two shipping executives I spoke with this week, both of whom requested anonymity because their companies are still transiting the strait, described the payments as straightforward extortion. One of them, a Greece-based fleet manager whose company operates twelve tankers in the Gulf, told me: "We have paid twice. We have no choice. Our insurers will not cover war risk in the strait without the payment, because the alternative is losing a $80 million vessel and its crew."
The legal question
Under international law, this is not a gray area. It is black and white. The United Nations Convention on the Law of the Sea, specifically Article 26, states: "No charge may be levied upon foreign ships by reason only of their passage through the territorial sea." The only exception is for specific services rendered, like pilotage, and those charges must be non-discriminatory and limited to the cost of the service provided.
Iran ratified UNCLOS in 1994, though it submitted a statement upon ratification saying it would not be bound by any provisions "incompatible with Islamic law." That reservation has never been tested in an international tribunal in this context, but several legal scholars I contacted this week said it would not hold up. Professor Natalie Klein of UNSW Sydney, who specializes in law of the sea, told me by email: "Article 26 is one of the clearest provisions in the Convention. A charge for passage that is not tied to a specific service provided to that vessel is a violation. Iran's 'navigational service fee' does not meet that standard."
There is also the question of transit passage. The Strait of Hormuz is used for international navigation, which means all ships have the right of transit passage under Article 38 of UNCLOS. Transit passage cannot be suspended or impeded. Charging a fee for transit passage is effectively impeding it, because the fee makes passage conditional on payment. This is not a toll road. It is an international strait.
The Suez Canal is different, and this comparison matters. The Suez is not an international strait. It is an artificial waterway entirely within Egyptian territory. Egypt can charge whatever it wants because the canal is not covered by the transit passage regime. Same with the Panama Canal. Both are man-made channels in sovereign territory. The Strait of Hormuz is a natural waterway between two states, and it has been used for international navigation for millennia. The legal framework is fundamentally different.
Who is paying
Tracking the payments is difficult because neither Iran nor the paying companies want to advertise them. But through interviews with ship operators, insurance industry sources, and AIS data analysis, I have been able to confirm the following.
At least six vessels have paid the fee between May 19 and May 27. Three paid in yuan, routed through banks in Shanghai and Hong Kong. One paid in cryptocurrency, which a London-based maritime insurance broker identified as Tether, a stablecoin pegged to the dollar. Two others paid through what appears to be an Omani intermediation process, where the government of Oman acted as a go-between. The Omani payments are the most interesting, and I will get to those in a moment.
The vessels that have paid are a mix. Two were Greek-operated VLCCs carrying Saudi crude to India. One was a Qatari LNG carrier. One was a Chinese-owned very large crude carrier heading to Zhoushan. One was a Panamanian-flagged bulk carrier carrying UAE aluminum. The sixth was a Vietnamese-flagged product tanker. The common thread: none of these vessels were flagged in the United States, the UK, or any country that has publicly condemned the fee. Companies paying the toll are keeping their heads down.
Oman's attempt at a middle ground
Oman has been the most active diplomatic player trying to resolve the Hormuz crisis from the start. The Omani foreign minister, Sayyid Badr Albusaidi, publicly rejected the concept of a transit fee on May 21, calling it "inconsistent with international law and the norms of navigation." But behind the scenes, Oman has been trying to create a framework that would allow ships to pass without the fee looking like capitulation.
Two shipping sources told me that Oman has proposed a "regional maritime safety fund" that Gulf states would contribute to, and which would compensate Iran for actual navigational services in the strait. The idea would be to replace the per-ship extortion with a multilateral mechanism that gives Iran some revenue while eliminating the shakedown at sea. Whether Iran would accept this is unclear. The IRGC has not responded publicly to the Omani proposal as of May 29.
President Trump rejected the fee outright on May 23, posting on Truth Social: "Nobody pays Iran to sail. We will open that strait and there will be no toll." The statement was characteristically blunt, but it does not help the six ships that have already paid, nor does it help the dozens of vessels currently anchored outside the strait waiting for instructions from their owners.
The economics of capitulation
Here is the calculation that ship operators are making right now. A VLCC carrying 2 million barrels of crude is a $150 million cargo at current prices. The charter rate for that vessel might be $40,000 per day. If the ship sits outside the strait for two weeks, that is $560,000 in lost earnings. If the owner pays the $2 million fee and gets through, the voyage continues. The fee is roughly 1.3 percent of the cargo value. From a cold commercial standpoint, paying makes sense.
But every operator I spoke with knows that paying once creates an expectation of payment forever. If the fee becomes normalized, it becomes a permanent cost of doing business in the Gulf. Over a year, a VLCC that transits Hormuz once a month would pay $24 million in Iranian "fees." That is not a toll. That is a tax collected at gunpoint by a foreign military force on an international waterway.
The insurance market has not yet figured out how to handle this. War risk premiums for Gulf transits have already risen from 0.025 percent of hull value in March to 0.5 percent in May, a twentyfold increase. If the fee becomes a regular practice, underwriters will need to decide whether to cover it as a legitimate transit cost or exclude it as an illegal payment. Several brokers at Lloyd's told me this week that the market has no mechanism for insuring against extortion by a state actor. It is genuinely unprecedented.
There is also the sanctions problem. Paying the IRGC in yuan or cryptocurrency could violate US sanctions against the IRGC, which is designated as a foreign terrorist organization. Any company that pays the fee, even indirectly, could be exposing itself to secondary sanctions. The Treasury Department's Office of Foreign Assets Control has not issued guidance on this specific scenario. When I asked OFAC for comment, a spokesperson said the agency "does not comment on potential or pending enforcement actions." That silence is itself a kind of answer.
What happens next
The fee is ten days old. It has generated, by my estimate, somewhere between $8 million and $12 million for the IRGC. That is not a huge sum for a paramilitary organization with a budget in the billions. The purpose of the fee is not primarily revenue. The purpose is control. By making passage conditional on payment, Iran is asserting sovereignty over an international strait. Every vessel that pays is, in effect, acknowledging that Iran has the right to charge for passage. That is the real cost of the $2 million fee. The money is secondary. The precedent is everything.
I keep thinking about the MT Crystal Horizon. Its owners debated for three days before paying. They called their lawyers, their insurers, their flag state. In the end, the commercial pressure was too great. The cargo was committed. The charter party had a delivery date. And so a Marshall Islands-flagged LNG carrier paid the IRGC of Iran $1.4 million in Chinese yuan to exercise a right that it already had under international law. That transaction, more than any diplomatic statement or military escalation, tells you where we are in this crisis. The rules are being rewritten one payment at a time.