Global Waterways and Transit Fees: A Comparative Overview

Under international law, ships are generally entitled to transit passage through straits used for international navigation. (AI image)

With the Strait of Hormuz now beginning to reopen, Iran and Oman — the two nations bordering the strait — have floated the idea of introducing a permanent fee system for ships using the passage. Until the US and Israel went to war with Iran, leading Tehran to shut the Strait of Hormuz, vessels passing through the world's most critical route for oil and liquefied natural gas trade were not required to pay any transit charges. The possibility of imposing transit charges in the Strait of Hormuz has drawn fresh attention to the dependence of global supply chains on a small number of strategically important waterways. Under international law, ships are generally entitled to transit passage through straits used for international navigation, and coastal states cannot levy charges on vessels merely for exercising that right. However, the legal framework does allow fees to be imposed for “specific services rendered to the ship.” Artificial waterways such as the Suez and Panama canals are governed under separate legal frameworks. As sovereign infrastructure, they are operated by authorities that have the right to collect fees from ships using those canals.

Let’s take a look at some of the major waterways in the world and what fees they charge, if at all:

Strait of Hormuz

The Strait of Hormuz links the Persian Gulf to the Gulf of Oman and the Arabian Sea. Around one-fifth of global oil trade moves through this narrow passage, transporting crude from Saudi Arabia, Iraq, Kuwait, the United Arab Emirates, Qatar and Iran to buyers across Asia, Europe and other regions. As a natural international waterway, it has traditionally allowed ships to pass freely under established navigation rights. That long-standing arrangement, however, was upended by the US-Israel war against Iran. Ships that continued to transit the waterway were required to pay ad hoc charges, with Iran seeking as much as $2 million per voyage, effectively creating an unofficial toll regime. Iran has now introduced a requirement for commercial ships to secure explicit permission before transiting the strait. The amount Iran ultimately intends to charge remains uncertain. In estimating the potential revenue the country could generate, the semi-official Tasnim News Agency published two scenarios in March—one assuming a fee of $2 million per vessel and another based on $400,000, which it estimated to be the transit cost through the Suez and Panama canals.

Bosphorus and Dardanelles Straits

The Bosphorus and Dardanelles are two straits within Turkish territory that link the Black Sea to the Mediterranean. They facilitate the movement of crude oil, natural gas, grains and containerized cargo from Russia, Ukraine and other Black Sea nations, including Georgia, Romania and Bulgaria. More than 40,000 ships passed through the waterways last year. Navigation through the Turkish straits is regulated under the 1936 Montreux Convention. The treaty returned control of the waterways to Turkey, replacing the international arrangement introduced after World War I, while continuing to guarantee merchant vessels the right of free passage. Although the convention does not allow transit tolls, it does authorize charges for specific services. Turkey therefore collects fees for services such as lighthouse operations, salvage assistance, pilotage and navigational support rather than for passage itself. Certain large vessels, including some oil tankers, are also required to pay an additional charge for tugboat escort services.

Oresund Strait

The Oresund Strait, also known as the Sound, lies between Denmark and Sweden and serves as one of the principal passages linking the Baltic Sea with the Atlantic Ocean. The waterway provides access to key ports in Sweden, Finland, the Baltic states, Poland and Germany, handling cargo that includes automobiles, grains and oil. International shipping moves through the strait without transit tolls, although certain vessels are required to take on pilots, with charges levied for those services.

Strait of Malacca

The Strait of Malacca connects the Indian Ocean with the South China Sea and the broader Pacific, providing the shortest maritime route between the Middle East and East Asia. Although ships can navigate alternative passages through Indonesia's archipelago, those routes are less practical and more difficult to use. Stretching about 800 kilometers (500 miles), the waterway carries more than 20% of global seaborne trade, at an estimated $2.4 trillion, including cargoes such as crude oil, propane and vehicles. Management of the strait is coordinated by Indonesia, Malaysia and Singapore, the three countries that border it. They also cooperate with Thailand, which has a short coastline at the strait's northern end, on measures aimed at ensuring safety and security, including joint patrols and anti-piracy operations. No transit toll is imposed on vessels using the Strait of Malacca. Instead, Indonesia, Malaysia and Singapore receive voluntary financial contributions through a dedicated fund used to maintain navigational infrastructure such as buoys, beacons and lighthouses. Japan, China, India, South Korea and the United Arab Emirates, together with industry organisations and maritime foundations, have all contributed to the fund.

Bab el-Mandeb Strait

Located at the entrance to the Red Sea, the Bab el-Mandeb Strait connects the Indian Ocean with the Suez Canal. The strait is bordered by Yemen on its eastern side and Djibouti and Eritrea to the west. Until recent years, it handled roughly 15% of global seaborne trade and recorded more than 22,000 vessel transits annually, carrying crude oil, liquefied natural gas, grains and consumer goods. Ships currently pass through the Bab el-Mandeb Strait without paying transit charges. However, Lloyd's List reported in April that the Houthis were exploring plans to levy tolls on vessels using the waterway after Iran established a precedent by introducing such charges in the Strait of Hormuz.

Taiwan Strait

The Taiwan Strait, which separates Taiwan from mainland China, is a key maritime passage connecting Northeast Asia with Southeast Asia, Europe and the Middle East. It plays a crucial role in supporting the export-oriented economies of South Korea, Japan, Taiwan and China. Commercial ships are not required to pay transit fees to pass through the strait. China, which considers Taiwan part of its territory, maintains that the Taiwan Strait constitutes China's internal waters rather than an international waterway. That position is rejected by the US and many other countries, which continue to send naval vessels through the strait despite objections from Beijing.

Strait of Gibraltar

Situated between Europe and Africa, the Strait of Gibraltar is a vital commercial shipping route linking the Mediterranean Sea with the Atlantic Ocean. Flanked by Spain and Morocco, the waterway narrows to just 13 kilometers at its slimmest point. As the main maritime gateway to the Mediterranean, it serves as an essential route for western and northern European countries engaged in trade with Asia. No transit fee is charged for vessels using the waterway.

Cape of Good Hope

Located at the southern tip of Africa, the Cape of Good Hope is not a maritime chokepoint but serves as an important alternative shipping route between Asia and Europe. The open-sea passage around South Africa also connects major trade routes linking Asia with the Americas. Ships are not required to pay any transit fee. Shipping activity along this route typically rises when geopolitical tensions make transit through the Suez Canal, the Red Sea or the Strait of Hormuz too hazardous. The recent disruption in the Strait of Hormuz has led to an increase of as much as 90% in vessel traffic around southern Africa. Although the Cape of Good Hope provides a safer alternative, it also significantly increases operating costs, as rerouting around Africa extends voyages by thousands of miles.

Panama Canal

Stretching 80 kilometers across Panama, the Panama Canal connects the Atlantic and Pacific oceans. It provides the quickest maritime link between Asia and the US East Coast and also reduces travel time for ships operating between Europe and the US West Coast. Constructed largely by the US, the man-made canal opened in 1914. During fiscal 2025, it recorded 13,404 vessel transits, a 19% increase from the previous year, and accounted for about 6% of global maritime trade. Since 1999, when the US transferred control of the canal to Panama, it has been managed by the Panama Canal Authority, an agency of the Panamanian government. Unlike natural international waterways governed by maritime law, the Panama Canal is sovereign infrastructure owned and operated by Panama. As a result, the Panama Canal Authority is entitled to levy transit tolls, with charges determined by factors such as vessel type, cargo capacity and the goods being carried. A medium-sized oil tanker typically pays between roughly $350,000 and $400,000 to secure a transit slot, although the price can rise to about $1 million through auctions during periods of drought or geopolitical disruption. In fiscal 2025, the Panama Canal Authority generated $5.7 billion in revenue from canal operations. US President Donald Trump raised concerns last year about Beijing's potential influence over the strategically important shipping route.

Suez Canal

The Suez Canal is a 193-kilometer man-made waterway running through Egypt that connects the Mediterranean Sea with the Red Sea, creating the shortest maritime route between Europe and Asia. It is a crucial trade corridor linking Europe, the Middle East and Asia, allowing ships to avoid the much longer journey around the southern tip of Africa. Since opening in 1869, the canal has become one of the world's busiest shipping routes. The canal is managed by Egypt's state-owned Suez Canal Authority, which is responsible for regulating navigation and determining transit rules. As with the Panama Canal, the Suez Canal is regarded as sovereign infrastructure, allowing the authority to levy tolls on commercial vessels according to the type of ship and the cargo it carries. A fully loaded tanker of the most common class in the global fleet typically pays about $380,000 for a one-way transit.