Indonesian Finance Minister Raises Possibility of Imposing Toll on Strait of Malacca

Singapore stands to make significantly more money from tolls for safe passage through the Strait of Malacca than Iran

The Strait of Hormuz is crossed in almost six hours by a ship, whereas the Malacca Strait takes almost 20 hours.

Although the concept of a country charging tolls for the safe passage of naval vessels through a natural sea route is contrary to the principles of the rules-based global maritime order established by the 1982 United Nations Convention on the Law of the Sea (UNCLOS), if the alternative is the high cost of oil or its complete absence, most countries would gladly pay a substantial toll of US$2 million per oil tanker.

The right of "transit passage."

The right of "transit passage" through straits used for international navigation is guaranteed by the United Nations Convention on the Law of the Sea (UNCLOS). Under Articles 37 to 44, it is made clear that ships and aircraft are entitled to continuous and expeditious passage that cannot be impeded or suspended by the coastal state, even if the Strait falls under its territorial jurisdiction.

 Article 26 of the UNCLOS prevents countries from charging vessels 

It is important to note that Article 26 of the UNCLOS prevents countries from charging vessels just for passing through, and allows them to only charge for specific services provided. The article states that "no charge may be levied upon foreign ships by reason only of their passage through the territorial sea" and that "charges may be levied upon a foreign ship passing through the territorial sea as payment only for specific services rendered to the ship". These charges shall be levied without discrimination”.

There is no shortage of such critical waterways,

The world's attention is currently focused on the Strait of Hormuz. Indeed, it is a critical waterway through which nearly 20% of the world's crude oil, 20% of its natural gas, and 33% of its fertilizers pass.

Nevertheless, there is no shortage of such critical waterways, which are all the more crucial for global maritime trade and perhaps even more readily obstructible.

Importance of the Strait of Malacca for global energy supply

The Singaporean foreign minister, Vivian Balakrishnan, used her speech in parliament last week to remind the world of the importance of the Strait of Malacca for global energy supply routes and container traffic. Moreover, Balakrishnan emphasized that while the Strait of Hormuz is a mere 21 nautical miles at its narrowest point, the Strait of Malacca is a much more compact two nautical miles wide. The global economy is significantly more reliant on the Strait of Malacca, which could be easily blocked.

In fact, while 20% of global crude passes through the Strait of Hormuz, as much as 29% passes through the Strait of Malacca. In addition, while the Strait of Hormuz accounts for almost 11% of global maritime trade, the Strait of Malacca handles as much as 24%.

Transit fees are being imposed.

Singapore stands to make significantly more money from tolls for safe passage through the Strait of Malacca than Iran, should it collaborate with Malaysia and Indonesia. Moreover, the Strait of Malacca is absolutely vital for the energy supply and maritime trade of countries such as China, Japan, Korea, Vietnam, Laos, Thailand, the Philippines, Australia, and New Zealand. The Strait of Malacca is only two miles wide at its narrowest point, in contrast to the Strait of Hormuz, which is over 21 miles wide.

The Strait of Hormuz is crossed in almost six hours by a ship, whereas the Strait of Malacca takes almost 20 hours. The ship could be targeted easily during these 20 hours in the narrow water channel by the nearby coastal states, in this case, Indonesia, Malaysia, and Singapore.

Obviously, if all countries start imposing tolls on straits near their borders, global shipping costs will increase manifold, triggering global inflation and adversely affecting maritime trade.

Iran’s logic is that it would use the tolls collected from the Strait of Hormuz in rebuilding the infrastructure that has been destroyed in the war.

ٌRelated : Report : Of the over a thousand ships trapped in the Persian Gulf, 7 have been released in recent days.

However, only two countries, the US and Israel, had attacked Iran, and Tehran wants to impose a universal toll on all ships transiting the Strait of Hormuz.

Also, if once such a toll has been normalized, other countries will also try to open a new source of revenue.

The US$2 million toll Tehran wants to impose on every oil tanker might not look like a big amount; however, it has the potential to destroy the very foundations of global maritime trade. Under no circumstances should such a demand be accepted.

Indonesia is considering imposing tariffs similar to those imposed 

On the other hand, just like Hormuz, Indonesia is thinking about charging a fee for the Strait of Malacca. Indonesia’s finance minister raised the idea of imposing a levy on ships passing through the strait yesterday, albeit half-jokingly. He described it as a possible way for the country to leverage its proximity to a key artery of global trade.

The Malacca Strait, which is bordered by the peninsular Malaysian state, Singapore, and Indonesia's Sumatra island, is the shortest route between the Indian and Pacific oceans. This makes it one of the busiest trade routes in the world. Last year, the number of transits through the Strait, which is just 2.8 kilometers wide at its narrowest point, topped 100,000 for the first time.

The Red Sea's Bab el-Mandeb Strait 

The Red Sea's Bab el-Mandeb Strait (also known as the "Gate of Tears") is another vital chokepoint for ships sailing along a key maritime route. Every vessel navigating the Suez Canal must pass through this strait. It therefore serves as a vital link connecting East and West Asia to Europe and North Africa.

Almost 10–12% of the world's crude oil and 14% of global maritime trade pass through the Bab el-Mandeb Strait. At its narrowest point, the strait is only 18 nautical miles wide. Blocking this crucial waterway would force all ships to transit around the Cape of Good Hope, increasing shipping costs by between US$300,000 and US$1 million per ship, and adding 10–14 days to each voyage. This could have a devastating impact on global maritime trade.

Before 2023, almost 12% of the world's crude oil passed through the Red Sea. However, since the Houthis started attacking ships in the Bab el-Mandeb Strait, this figure has fallen to just 5%. A sharp drop in global container traffic has been accompanied by a sharp rise in insurance costs for ships travelling through the Red Sea.

Another crucial choke point in the Mediterranean Sea is the Strait of Gibraltar. Geographic Reference: The narrowest point here is just 8 nautical miles wide, stretching from Punta de Tarifa in Spain to Point Cires in Morocco. Around 100,000 vessels cross the Strait of Gibraltar each year, which equates to almost 300 vessels per day on average. If Spain were to start collecting a US$2 million toll per ship, like Iran, it could earn almost US$600 million per day.

Source : Eurasian Times.

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