‘Proposed deal will give Tehran control over inbound strait traffic’, Pg16

Key Highlights:

• Iran proposed a deal with Oman to control inbound shipping traffic through the Strait of Hormuz, a critical global chokepoint.
• The proposal includes Iran intervening with inbound traffic and imposing transit fees of 5-7% on cargo prices, while Oman discusses fees around 3%.
• The deal faces significant hurdles due to existing U.S. sanctions against Iran and its entities, including the Persian Gulf Strait Authority.
• The Lloyd's Market Association introduced a clause terminating insurance cover for vessels that pay transit fees for passage through the Strait of Hormuz.
• Shipping associations have warned that compulsory charges would act as a "toll," threatening resilient supply chains, economic stability, and energy security.

Detailed Insights:

• The proposed arrangement would grant Iran the ability to intervene with vessels entering the Persian Gulf via the Strait of Hormuz.
• Outbound traffic would follow a route between Iran and Oman, requiring exit clearance from Oman after notifying Iran.
• The U.S. Treasury has prohibited U.S. persons from receiving services from the Iranian government related to a "guarantee of safe passage," making any payments a compliance issue.
• Iran established the Persian Gulf Strait Authority in May to operate the waterway, which has since been targeted by U.S. sanctions.
• The International Maritime Organization (IMO) adopted a Traffic Separation Scheme (TSS) for the Strait of Hormuz in 1973, revised in 1979, to manage maritime traffic and prevent collisions.
• The Strait of Hormuz is a narrow passage connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea, through which approximately one-fifth of the world's total seaborne oil trade passes daily.
• Disruptions in the Strait can significantly impact global energy markets, maritime insurance risks, and tanker routing decisions.

Key Concepts Involved:

• Strait of Hormuz: A narrow, strategically vital waterway connecting the Persian Gulf to the Arabian Sea, crucial for global oil and liquefied natural gas shipments.
• U.S. Sanctions: Economic penalties imposed by the United States, often targeting specific countries or entities to achieve foreign policy objectives, such as those against Iran's oil trade and shipping.
• Traffic Separation Scheme (TSS): A maritime traffic management system, adopted by the International Maritime Organization (IMO), designed to prevent collisions in busy shipping lanes by separating inbound and outbound vessel traffic.
• Lloyd's Market Association (LMA): A representative body for underwriting businesses in the Lloyd's of London market, which issues standard clauses for insurance policies, including those related to sanctions and war risks.
• International Maritime Organization (IMO): A specialized agency of the United Nations responsible for regulating shipping globally, focusing on safety, security, and environmental standards.