Trump Demands Iran Pay Compensation as Hormuz Strait Deal Collapses

By Steve Holland and Jacob Bogage

WASHINGTON, Aug 10 (Reuters) – U.S. President Donald Trump on Monday demanded Iran pay compensation for the people he said it had killed in wars, attacks and protests, in a move that will likely complicate efforts to reopen the Strait of Hormuz.

Trump's proposal, which has not been raised before, was a response to Tehran's demands for compensation and an end to sanctions. This are largely in line with the terms of a preliminary peace deal signed in June, which has since broken down.

Since the war began in February, Trump has repeatedly oscillated between threats of escalation and claims that a peace deal is imminent.

"I see that Representatives of the Islamic Republic of Iran are asking for compensation for the damage done to them during the last five month Military Conflict," Trump wrote on Truth Social. "It is an interesting idea because now I am likewise demanding compensation from Iran."

It was unclear how the two sides can come to an agreement, given that neither side is likely to accept the other's terms.

Oil prices rose after Trump's post, with Brent crude trading at $87, up 4.6% for the day.

Trump said the U.S. would seek compensation for people who have been killed or wounded in previous conflicts, as well as payments to the families of hundreds of thousands of protesters whom he said Iran had killed.

Trump encouraged protesters to overthrow the Iranian government when the war began with U.S. and Israeli airstrikes in February. Rights groups say the Iranian government has continued to crack down on opponents since then.

Trump also said Iran should compensate families of the 17 U.S. sailors killed in an October 2000 attack in Yemen on the naval vessel USS Cole, which has been blamed on al Qaeda, not Iran.

"Also, with respect to the Iran negotiations, Iran should be responsible for the damages and death caused to the people of Lebanon, Syria, Yemen, and Gaza!" Trump wrote in a second post.

Iran earlier said it was nearing a final pact with Oman defining new shipping lanes between them through the Strait of Hormuz but repeated that the U.S. must meet conditions, including compensation and an end to sanctions and military threats before the key waterway is reopened.

The strait, through which about a fifth of global oil and liquefied natural gas flowed prior to the conflict, has been effectively blocked since the war began, pushing up oil prices and inflation.

Ironically, the agreement with Oman would give Tehran more leverage over the key waterway than it had before the war began.

Trump is under pressure to end a war that is deeply unpopular at home ahead of midterm elections in November, and high fuel prices are a top issue in rural areas that have backed him in the past.

"What you're seeing here is the beginning of a capitulation," Democratic U.S. Representative Bill Keating said on CNN. "This is reality. It's sinking in."

Earlier on Monday, Iranian Foreign Ministry spokesman Esmaeil Baghaei said talks with Oman were "progressing smoothly and constructively," with an agreement reached on a shipping route map, while some technical issues remained unresolved.

Baghaei said the discussions also covered services which would normally involve payment, such as safe navigation, environmental protection, maritime services and combating crime.

U.S. officials have repeatedly ruled out any deal that would allow Tehran to charge fees for access to the strait.

But months of U.S. military efforts, including a two-week campaign of strikes in July, have not broken Iran's grip on the strait.

Washington and Tehran agreed to a ceasefire in June, but the U.S. reimposed a blockade on Iranian shipping in July, a move that Tehran said violated the truce.

Iran has been striking back with missiles and drones against Washington's allies in the region, while also targeting commercial ships transiting the strait without its permission.