Iran has temporarily lifted a 10% freight tax on foreign vessels carrying oil, gas and liquid petroleum products to and from the nation, in a measure aimed at reducing strain on its energy sector amid significant interruption to maritime shipping.
Iran’s semi-official Fars news agency reported the stoppage on Thursday as a U.S. naval blockade has drastically limited Iran’s ability to export oil by sea.
The levy raised cost of transportation for foreign shipping businesses who transfer energy items to and from Iranian ports. Iranian authorities now expect the abolition of the tax will make the voyages more attractive financially and encourage foreign ships to operate again or boost their operations.
The temporary suspension was issued by Iran’s presidential legal deputy, Fars reported, as the administration seeks to approve the policy and publish a complete list of energy goods that would be subject to the fee.
10% levy on freight charges payable by foreign vessels carrying imported or exported oil, gas and liquid petroleum products.
The decision reflects Tehran’s move to cut down extra costs incurred by multinational shipping companies as security dangers and restrictions in and around Iranian waterways have already made marine energy transit significantly harder.
The declaration comes amid unprecedented interruption to shipping through the Strait of Hormuz, one of the world’s most crucial energy routes.
Kpler data showed just four commodity vessels transited the waterway on September 3, well below the 10-day average of 15, Reuter said. The data do not include ships that have turned off their automatic identification systems.
Before the present war, some 125 commercial ships transited the Strait of Hormuz each day.
The strait is of particular importance to global energy markets since it connects the Persian Gulf with the Gulf of Oman and serves as a key conduit for oil and liquefied natural gas exports from Gulf exporters.
Iran’s latest move also comes as the United States holds a naval blockade targeting Iranian oil supplies.
The blockade has sharply restricted Iran’s capacity to ship crude oil by sea, while U.S. military operations against Iranian tankers has increased risks for ships working in the region.
The wider flows of Gulf oil have also been hit by the disruption, with exports of oil from the region well down on the levels observed before the war, Reuters said.
Shipping limitations have driven up energy costs, with Brent crude trading recently above $100 a barrel as worries about supplies throughout the world mount.
The suspension of the goods tax relieves one financial burden from foreign shipping businesses, but it does not reduce the broader hazards of operating in the region.
Tanker operators are paying more for security and insurance and are unsure if the vessels can safely pass through Iranian seas and the Strait of Hormuz.
The disruption has also led some vessels to skip the river altogether or use alternative routes, pushing up transportation costs and delivery delays even further.
Iran’s move, therefore, appears to be aimed at making its energy shipments more competitive at a time when security and geopolitical issues are already preventing foreign maritime companies from doing business in the region.
The move is part of a wider dispute over the transportation of energy supplies amid the intensifying U.S.-Iran rivalry.
Iran has been looking for ways to keep its oil commerce going despite sanctions and the naval blockade. Separately, Reuters claimed that Tehran has devised an alternative means of maintaining trade despite restrictions on conventional financial channels through agreements involving oil-for-goods transactions with Chinese firms.
Meanwhile, the threat of interruption around the Strait of Hormuz has become a major concern for global energy markets.
With activity still substantially below normal levels, governments, traders and energy companies are looking closely to see whether the latest Iranian step might lure more international vessels back into the country’s energy trade.
The removal of the 10% freight fee should relieve some pain for Iran’s exporters and importers. But the bigger problem is the security environment for Iranian shipping and the ongoing dispute with the United States.
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