Iran wants a mafia-style ‘protection’ toll on the Strait of Hormuz, but the eye-popping $20 billion per year haul is a pipe dream

Iran has demanded that the Strait of Hormuz be subject to a mafia-style "protection" toll system, which could generate up to $20 billion annually, according to analysts. However, the United States and Iran's Gulf neighbors are unlikely to accept such steep tolls, potentially prolonging the current stalemate or leading to a lesser financial settlement.

Iran seeks a 5% or 7% fee per barrel of oil, which could amount to $18 billion to $25 billion in annual revenue, causing global inflationary cost hikes. The U.S., however, views Iran's demands as extortion and is unwilling to grant Iran such authority, prolonging the standoff. While Iran is aware that aggressive tolling would deter global shipping, it continues to hold this leverage during nuclear negotiations and sanctions relief discussions.

The legal and practical challenges of implementing a tolling system in the strait, as well as the political considerations involved, make it an unlikely solution. Iran may be willing to accept a compromise involving voluntary fees from Gulf neighbors or a smaller fee through a joint management system with Oman. However, Iran's demands for substantial financial compensation and a return to the June interim deal are unlikely to be met by the U.S., which is looking to exert pressure through the Strategic Petroleum Reserve while avoiding military escalation.