Oman Proposes Voluntary Fee System for Strait of Hormuz Transit, Backed by Gulf States

By Timour Azhari and Parisa Hafezi

DUBAI, July 28 (Reuters) – Oman has presented Iran with a plan backed by Gulf states to manage the Strait of Hormuz, including collecting voluntary fees for using it, a Gulf source and a Western diplomat told Reuters on Tuesday.

The plan could serve as a basis to end the disruption to trade through the strait caused by the U.S.-Israeli war on Iran.

President Donald Trump, who abruptly called off a two-week U.S. bombing campaign over the weekend in his latest strategic U-turn, said there were "good talks" under way with Iran but threatened to restart strikes unless negotiations deliver. Iran denies seeking to resume talks with the United States.

Washington launched its renewed bombing campaign earlier this month to break Iran's grip on the strait, through which about a fifth of global oil and liquefied natural gas flowed before the war.

Iran effectively shut the strait to ships other than its own after the United States and Israel attacked on February 28. A deal last month between the United States and Iran partially reopened it, but the agreement collapsed in early July after Iran fired on ships using a channel it does not approve.

Iran has said it wants to manage the strait alongside Oman, which controls the opposite shore, and charge service fees to ships that use it. Washington wants to return to the status quo prior to the war, when ships were able to pass freely with no payments, and says charging mandatory fees would be illegal.

Under the Omani proposal, Iran would not exercise sole control and fees would be voluntary, the Gulf source and Western diplomat briefed on the matter told Reuters.

The system would be analogous to one in place on Asia's Strait of Malacca, where Indonesia, Malaysia and Singapore ask ships to pay voluntary contributions to fund navigation, environmental protection and search-and-rescue operations.

The Western diplomat compared it to a voluntary carbon tax for flights, where anyone buying a plane ticket can choose to tick a box if they want to pay to offset their emissions.

The Gulf source said that as of Monday evening there had been no formal response from Iran to the proposal. Omani officials met Iranians in Tehran over the weekend.

Iran's Foreign Minister Abbas Araqchi discussed the Strait of Hormuz with his Omani and Saudi counterparts on Monday and stressed the need for regional cooperation, an Iranian Foreign Ministry statement said.

Trump called off his latest campaign of air strikes after receiving advice from military commanders that the strategy had run its course. The 13 nights of renewed U.S. bombing killed scores in Iran and destroyed bridges and tunnels across the south as well as military targets.

Iran had responded with attacks on U.S. bases in neighboring countries that killed four service members, and strikes on civil infrastructure in Gulf states that it said were in response to U.S. strikes on civilian targets.

Iran has said it would hold fire as long as Washington does. But drone attacks were reported in Jordan, Saudi Arabia and northern Iran on Monday, and Jordan reported another drone being downed on Tuesday.

Speaking on Monday, Trump expressed optimism for a deal to end the five-month conflict, while warning that U.S. strikes would resume if negotiations failed to deliver.

"I think there's a good chance that something could happen, and if it does, good, if it doesn't, we go back to doing what we were doing two days ago."

Iran says it has not sought any new negotiations with the United States, which it accuses of violating the agreement reached last month on a framework for talks to end the war.

The U.S. president is scheduled to meet Israeli Prime Minister Benjamin Netanyahu in Washington on Tuesday. Although Israel was involved in the initial bombing campaign, it has not been part of subsequent peace talks, and recent relations between the two leaders have been strained.

Trump has had to rein in the Israeli leader from attacking targets in Lebanon to try to weaken Iran-backed Hezbollah militants, complicating peace talks with Tehran.

The end of the U.S. bombing campaign over the weekend sent oil prices tumbling by around 8% on Monday, and the fall continued on Tuesday. Brent crude futures were down more than 2.5% at around $86 a barrel by mid-morning on Tuesday.

Washington and Tehran reached an agreement in June on a framework for talks meant to take place by the end of August to resolve major issues such as Iran's nuclear program.

But they have disputed the meaning of the memorandum's language about the strait, with Washington insisting it requires Tehran to allow free travel, while Iran says it grants it the authority to supervise transit.