The Daily View: The cost of freedom

UNCERTAINTY is great for shipping, until it isn’t. That’s been a common refrain since the US launched strikes on Iran at the end of February and turned the industry on its head.

Nearly 90 days later and the Strait of Hormuz remains closed, and an opening seems further away than ever.

Assurances from president Trump that a peace deal was almost signed were followed by fresh strikes by the US on southern Iran, removing any fig leaf of legitimacy to the ceasefire that has theoretically been in place since early April.

While the ensuing uncertainty has boosted rates, the pace of official statements and shifting signals has become disorienting. Project Freedom — and the US naval escorts promised under it — has yet to have materialised as billed.

Iran also launched its new Persian Gulf Strait Authority last week; a body it says will coordinate all future transits. Details on how the system will actually function remain far from clear.

Such is the level of uncertainty, some shipowners have admitted privately they would even prefer paying fees to transit the chokepoint. At least then they’d know where they stand.

Industry associations have warned against such payments.

But it’s easy to see why toll fees may be more tolerable than the current status quo: voyages could be planned and payments to the IRGC would become just another cost of doing business, much like increasing Panama Canal fees.

Yes, it would breach the United Nations’ Convention on the Law of the Sea (which neither Iran nor the US has ratified) but UNCLOS has been stretched repeatedly in recent years.

Shipping, however, remains characteristically resilient. Crew changes are now far more routine than at the outset of the crisis, and early fears of bunker supplies drying up have been allayed... at least for now.

But as our APAC editor Cichen Shen noted, resilience is not the same as recovery. For that to happen, at least some of the moving parts in this still‑shifting puzzle need to lock into place.

Joshua Minchin
Senior reporter, Lloyd’s List

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