The distinction this site has been drawing since its founding posts in mid-April — between a prohibited transit toll and a permitted services fee — has, over the past three weeks, become the central pivot of the United States-Iran deal to reopen the Strait of Hormuz. As of 13 June 2026, with the final agreed text of the draft peace deal reportedly reached on 12 June through Pakistani mediation, the chokepoint provisions of the contemplated memorandum of understanding turn on exactly this distinction. The memorandum, on the available reporting, reopens the strait “without tolls.” Iran, in parallel, maintains that it will charge a fee for “services provided.” Both statements are, in the careful legal reading, simultaneously true. The space between them is the institutional question the entire crisis has been about.
Iran’s Foreign Ministry spokesman, Esmail Baghaei, articulated the Iranian position on 25 May: Tehran is “not looking to charge tolls,” but ships “could be required to pay for navigation, security and environmental services,” because “services will be provided” — navigation assistance and environmental-protection measures in the strait — which “require charging fees.” President Trump, for his part, characterised a Hormuz fee arrangement as “a beautiful thing” that could “change global rules.” The International Maritime Organization warned in April that “there is no international agreement where tolls can be introduced for transiting international straits” and that “any such toll will set a dangerous precedent.” The Greek Prime Minister, Kyriakos Mitsotakis, representing the world’s largest shipowning nation, called an Iranian toll scheme “completely unacceptable.” Every one of these statements is about the toll-versus-service-fee line. This post reads where that line actually falls.
The legal distinction, precisely
The United Nations Convention on the Law of the Sea, 1982, draws the line directly. Article 26, paragraph 1, provides that “no charge may be levied upon foreign ships by reason only of their passage through the territorial sea.” Paragraph 2 provides that charges may be levied “only as payment for specific services rendered to the ship.” Article 38 establishes the right of transit passage through straits used for international navigation, and Article 42 limits the laws a strait state may adopt to matters of navigational safety, traffic management, pollution, fishing, and customs — with the explicit proviso in Article 42(2) that such laws “shall not discriminate in form or in fact among foreign ships or in their application have the practical effect of denying, hampering or impairing the right of transit passage.”
The distinction is therefore not a matter of nomenclature. A charge is permissible if, and only if, it is (a) payment for specific services actually rendered to the ship, (b) non-discriminatory in form and in fact, and (c) not structured so as to deny, hamper, or impair transit passage. A charge fails the test if it is levied by reason only of passage, if it discriminates among ships by flag-state or political posture, or if it is structured to impede transit. The label the charging state applies — “toll,” “service fee,” “navigational charge,” “transit fee” — has no bearing on which side of the line the charge falls. The substance governs.
The Suez and Panama precedent on the same line
The Suez Canal Authority and the Panama Canal Authority both operate on the permitted side of this line, and they have done so for decades. The Suez tariff is a charge for the integrated services the Authority renders: convoy scheduling, transit management, pilotage, traffic services, casualty-response capability, and the maintenance of the canal infrastructure itself. The Panama tariff is a charge for the equivalent bundle plus the locks-and-water-management system. Neither tariff is levied “by reason only of passage”; both are levied as payment for an extensive set of services without which the transit could not occur. Neither tariff discriminates by flag-state political posture; both apply equally across all flag-states on commercial terms differentiated only by operationally relevant factors (tonnage, vessel type, cargo, laden condition). The international shipping community, the IMO, and the operator class have accepted both tariffs for decades precisely because they fall on the services side of the Article 26 line.
This is the point the site has been making since 18 April, and it is now the operative legal question in the deal. A Hormuz transit authority can charge for transit, lawfully, if the charge is structured as the Suez and Panama charges are structured. The question is never whether a charge may be levied; the established answer is that a services charge may be. The question is always whether the specific charge, as structured, falls on the services side of the line.
Whether the Iranian “service fee” qualifies
Here is where the careful reading has to be honest in both directions. The Iranian relabelling of its charge from “toll” to “service fee” is a movement toward the correct legal framing. The services Baghaei enumerated — navigation assistance, security, environmental protection — are, in principle, exactly the kind of specific services that Article 26(2) permits a charge for. If Iran provides genuine navigational, safety, and environmental services in the strait, and charges for them on a non-discriminatory, cost-related basis, the charge would fall on the permitted side of the line. The conceptual move is sound.
The substance, however, is not yet on the permitted side, on three specific grounds that the site’s prior analysis has documented. First, the discrimination test. The charge as presently structured operates through the five-tier flag-state classification documented in the post on the PGSA on the Suez/Panama yardstick and codified in the twelve-article statute documented in the post on the sovereignty law. A charge that varies by the diplomatic posture of the flag-state government — higher for “hostile” nations, denied for “damaged Iran” flag-states until compensation is paid, banned outright for Israeli vessels — discriminates “in form or in fact” in precisely the way Article 42(2) prohibits. A genuine service fee for navigation and environmental services would be the same for a Liberian-flagged VLCC regardless of who owns it or where it trades.
Second, the cost-relation test. A genuine service fee is related to the cost of the service rendered. The reported Iranian charge — one to two million United States dollars per vessel, or the crypto equivalent of approximately one dollar per barrel of oil cargo — is not calibrated to the cost of providing navigation, security, and environmental services. It is calibrated to the value of the cargo and the leverage of the chokepoint. A charge of one dollar per barrel on a two-million-barrel VLCC is a two-million-dollar charge that bears no relationship to the few tens of thousands of dollars that pilotage, traffic management, and environmental monitoring for a single transit actually cost. The Suez and Panama tariffs, while substantial, are related to the extensive infrastructure and service operations those authorities actually run; the Iranian charge is related to the barrels in the hold.
Third, the administering-body test, which the companion post on the OFAC designation of the PGSA takes up in detail. A service fee collected by a civilian authority that actually operates navigational and environmental services is a service fee. A charge collected by an IRGC-administered body that the United States Treasury has designated as a sanctions-evasion instrument is not converted into a lawful service fee by the relabelling, because the body collecting it is not providing the services in the institutional form that the Article 26(2) framework presumes.
Why the relabelling still matters
None of the above means the relabelling is empty. It matters, and it matters in the site’s favour, for a specific reason: it concedes the principle. By moving from “we will charge a toll because we control the strait” to “we cannot charge a toll, but we may charge for services,” the Iranian government has accepted the UNCLOS Article 26 framework as the governing legal standard. That is a significant concession. It means the disagreement is no longer about whether the chokepoint operates under international maritime law — Iran now says it does — but about whether the specific Iranian charge meets the international maritime law standard it has conceded applies.
That is a much narrower, much more tractable disagreement than the one the crisis began with. It is a disagreement about structure, not about principle. And structure is solvable. The site has been documenting the solved structure for two months: a civilian administering body, an equal-access tariff calibrated to service cost, non-discriminatory application across flag-states, dollar-denominated settlement. The Iranian concession that the charge must be a service fee rather than a toll is the concession that brings the negotiation onto the terrain where the solved structure is the answer.
The deal’s exposure on the distinction
The contemplated MOU’s “without tolls” language and Iran’s parallel “service fee” position can coexist in the signed text precisely because both are true under the Article 26 framework: the strait reopens without prohibited tolls, and Iran may charge for genuine services. The exposure in the deal is that the text may resolve the label without resolving the substance. If the MOU says “no tolls” and Iran continues to collect a one-dollar-per-barrel, flag-state-discriminatory, IRGC-administered charge under the “service fee” label, the deal will have papered over the distinction rather than resolved it, and the bifurcation documented in the prior market analysis will persist under a new name.
The test of the deal, on the site’s reading, is not whether the word “toll” appears in the text. It is whether the charge that survives the deal meets the three substantive tests above: non-discrimination across flag-states, calibration to service cost, and collection by a body that actually provides the services. A “service fee” that meets those tests is the institutional answer the site has been arguing for. A “service fee” that fails them is the unilateral framework wearing the vocabulary of the institutional answer. The vocabulary has converged; the substance has not yet. The comparison page sets out the structure that would close the remaining gap. The rate schedule prices a transit on a genuine service-cost basis. The calculator prices a specific transit against it. The distinction the site opened with is now the distinction the deal turns on.
Sources: NBC News, “U.S.-Iran deal to reopen Strait of Hormuz could be signed within days, both sides say,” 13 June 2026; Fortune, “A deal to end the U.S.-Iran war could be finalized within 24 hours. Tehran wants to charge ships crossing Hormuz ‘for services rendered,'” 13 June 2026; The National, “Iran demands ‘service fees’ for vessels in Strait of Hormuz ahead of potential US deal,” 25 May 2026; Euronews, “Iran says it is charging fees for ‘navigational services’ through Strait of Hormuz,” 25 May 2026; Gulf News, “New Hormuz toll fee? A ‘beautiful thing,’ says Trump”; Fox News, “Strait of Hormuz toll would set dangerous precedent, UN shipping agency warns,” 9 April 2026; statements by Iranian Foreign Ministry spokesman Esmail Baghaei, IMO spokesperson, and Greek Prime Minister Kyriakos Mitsotakis; United Nations Convention on the Law of the Sea, 1982, Articles 26, 37-44; Suez Canal Authority and Panama Canal Authority tariff frameworks; this site’s prior analyses on the UNCLOS vacuum (24 April), the new-chapter framework (30 April), the Trump-Xi summit (15 May), the PGSA on the Suez/Panama yardstick (19 May), and the twelve-article statute (23 May).