Iran’s Economic Interests in the Strait of Hormuz

Iran is seeking to cash in on the Strait of Hormuz, a vital oil lifeline to the world, by maximizing revenue through discounted sales and state-run shipping. The country’s economic strategy is shaped by international trade agreements and maritime laws, particularly the United Nations Convention on the Law of the Sea (UNCLOS).

Reliance on Transit-Passage Rights

Iran relies on transit-passage rights under UNCLOS, which guarantees free passage for all vessels, including warships, through the strait. However, the country uses political threats to extract concessions from buyers, especially China, the single largest importer of Hormuz-bound oil.

Sanctions-Driven ‘Cash-In’ Tactics

With secondary sanctions limiting the pool of legitimate buyers, Iran has turned to discounted sales to sanctioned-friendly states and to state-run shipping firms that can navigate the legal gray-area of ‘transit’ versus ‘port-call’.

The Goreh-Jask and Khalij-Fars pipelines are bilateral agreements that give Iran a limited, legally permissible alternative to maritime export. However, their modest capacity means the strait remains the primary revenue source, reinforcing Iran’s focus on keeping it open while retaining the ability to threaten closure as a bargaining chip.

OPEC-Plus Production Limits

The 2.5 mb/d quota obliges Iran to ship the oil quickly; any prolonged closure would force costly storage or discounted ‘spot’ sales, eroding the fiscal benefit of its oil sector.

Any attempt by Iran to physically block transit passage would breach UNCLOS Art. 38 and could trigger collective security actions by the U.S., U.K., France, and other naval powers that routinely conduct Freedom-of-Navigation Operations (FONOPs) in the strait.

Sources