The Strait Joint Venture
Iran tolls Hormuz. Trump wants in. Welcome to the new Middle Ages.
Grüezi!
For four hundred years, the liberal international order has been built on a specific project: abolishing tolls at maritime chokepoints.
The Sound Dues, the Rhine castles, the Ottoman Dardanelles – each was bought out, bombed out, or legislated away. That project is now running in reverse.
Iran’s imposition of a $1-per-barrel toll on tankers transiting the Strait of Hormuz – payable in Bitcoin, to evade sanctions – is the first levy on an international strait in modern history.
Trump’s response was not to oppose it but to propose a ‘joint venture.’
What looks like a shipping crisis is actually something older: the return of geographic rent extraction as a model of sovereignty.
And the medieval Rhine tells you exactly where it leads.
1. The Liberal Order vs the Toll-Lords
For over four hundred years, from 1429 to 1857, Denmark collected the Sound Dues. A payment from every vessel transiting the Øresund between the North Sea and the Baltic. At their peak, about two-thirds of the Danish states revenues came from these tolls.
The collection mechanism was smooth: tolls were set at 1–2% of declared cargo value, with the Danish Crown reserving the right to buy up a cargo at the shipper’s declared price – a little game theory enforcement device that kept declarations honest. Ships refusing to stop at Kronborg Castle faced cannon fire from both shores.
Down the Rhine, for roughly a thousand years, feudal lords extracted tolls from river traffic, building Zollburgen where it narrowed and stretching iron chains across the water.
When Frederick Barbarossa’s grandson died in 1250, leaving the Holy Roman Empire without an emperor, toll stations proliferated uncontrollably – the original ‘robber barons.’ Towns clubbed together to form the Rhenish League in protest. They were only six centuries too early.
The result of these tolls was the classic problem of complementary monopoly. Multiple local lords each setting their own toll on the same stretch of water, each squeezing shipping more than even a single monopolist would.
Their abolition starts with the construction of the modern international order we’ve lived with since Napoleon. The 1815 Congress of Vienna established freedom of navigation on international rivers and created the Central Commission for the Navigation of the Rhine – the first intergovernmental organisation in modern history.
The 1857 Copenhagen Convention abolished the Sound Dues after the United States forced the issue by announcing it would simply stop paying; Denmark got millions in compensation from European neighbours.
The 1868 Mannheim Convention prohibited all tolls on the Rhine. The 1936 Montreux Convention restricted Turkey’s ability to extract rent from Bosphorus transit. UNCLOS codified transit passage through international straits as a right.
Freedom of shipping was not simply ‘declared’ into existence.
2. From Fee to Free
We think of this as progress: modernity replaces feudalism, reason replaces tradition.
But Rhine tolls disappeared when the coalition for integrated transit – big states, industrial producers, trading companies and major ports – became more powerful than the coalition for jurisdictional rent extraction – princes, bishops, castle-lords and privileged staple towns.
The real breakthrough came when larger territorial states and commercial interests became strong enough to overrun the older patchwork of local rights.
Revolutionary and Napoleonic France began the process on the left bank by imposing centralised rules. Merchants preferred it precisely because published rates and fewer toll points made costs easier to calculate.
After Napoleon, the Congress of Vienna created the Rhine Commission because the great powers feared that, left alone, the individual states, princedoms and duchies along its banks would simply reintroduce the old barriers.
Prussia, the Netherlands, exporters and downstream port interests won. Smaller riverside rulers and towns that forced traders to offload goods and sell locally or pay dues lost out.
Chokepoint tolls ended not because the world grew more enlightened, but because the coalition that profited from opening waterways became more powerful than the coalition that profited from closing them.
That distinction matters now, because the balance of power is shifting back.
3. Hegemon’s Bets: Cash for Carriers
1980’s Carter Doctrine made clear that the United States was the power providing naval security in return for structural economic advantages.
The deeper arrangement was 1974’s Kissinger-Saudi deal: the Kingdom priced oil exclusively in dollars and recycled its petrodollar surpluses into US Treasury securities, in return for US military protection.
Eight carrier strike groups were required to keep one continuously on station.
The cost was extraordinary. Roger Stern’s 2010 study in Energy Policy estimated that military force projection in the Gulf had cost the US nearly $7 trillion from 1976 to 2007 – comparable to total Cold War spending.
Yet by 2010, the US received less than 10% of Gulf oil exports.
The arrangement made sense as a global power play. Dollar-denominated oil created permanent global demand for dollars, which let the US run deficits, borrow cheaply, and fund those very military costs in a currency it controlled.
Petrodollar recycling into Treasuries meant the Saudis were effectively lending back the money America spent protecting them. The circularity was the advantage. No other country could run that loop. And the US Navy’s presence functioned as surveillance and sanctions-enforcement infrastructure.
Alternatives that might have reduced chokepoint dependence were not encouraged. Saudi Arabia’s East-West Pipeline has 5 million barrels per day of capacity but was typically used at a fraction of that – a pricey insurance policy in a free flowing maritime world. The UAE’s Habshan-Fujairah pipeline carries 1.5–1.8 million bpd. Together, they cover barely a third of the 20 million bpd that normally transits Hormuz.
Why the lack of encouragement?
Look at Thailand’s long talked about Kra Canal, which would have bypassed the Strait of Malacca. In 1897, Thailand and the British Empire signed a secret convention not to build it, since it would challenge Singapore’s dominance.
The canal has been proposed repeatedly since the seventeenth century and blocked every time – by Singapore, India, the US and Thailand’s own separatist fears.
Chokepoint concentration is not an accident of geography. It is very much maintained by the interests of those who benefit .
4. Settle in Bitcoin
Toll-Lords have returned in sovereign form. Not with castles on clifftops, but with the threat of missile-launchers, drones and mines.
Following the US-Israeli attack on Iran in late February, the IRGC effectively closed the Strait of Hormuz. By mid-March, Iran had established a de facto toll system. On March 30, Iran’s parliament formalised it with the Hormuz Transit Fee Law.
The Financial Times reported Wednesday that Iran’s toll structure is now operational: tankers email their cargo details to Iranian authorities, who charge around $1 per barrel of oil.
Payment is in Bitcoin – specifically to prevent funds from being traced or seized under US sanctions. Once cleared, vessels have seconds to complete payment before passage is granted.
Empty tankers transit for free. Laden ones pay up or face the warning broadcast on VHF radio to ships in the Gulf: ‘If any vessels try to transit without permission, they will be destroyed.’
At $1 per barrel, a fully loaded VLCC carrying two million barrels faces a $2 million toll. But the money is secondary to the conversion of an international waterway into a checkpoint.
Ships submit ownership records, flag registration, cargo manifests and crew lists. The IRGC assigns a ‘friendliness ranking’ determining the terms of access. Ships with any US or Israeli connection are blocked outright. Others reflag to qualify for friendly terms.
The kleptocratic possibilities of this arrangement are obvious for the IRGC. The scheme also appeals to America’s president.
Asked by an ABC reporter whether he would allow Iran to charge tolls, Trump responded:
‘We’re thinking of doing it as a joint venture. It’s a way of securing it – also securing it from lots of other people. It’s a beautiful thing.’
The ceasefire framework reportedly includes provisions allowing both Iran and Oman to charge tolls – unprecedented for an international strait.
International law is unambiguous, if no longer in vogue. UNCLOS Article 38 provides for transit passage that ‘shall not be impeded.’ Article 26 prohibits charges ‘by reason only of their passage.’
5. Medieval Monopoly Problems Return
Iran is not acting alone.
In 2023, Egypt’s Suez Canal collected a record $10.25 billion in tolls – about 15% of the country’s foreign currency income. Then the Houthis began attacking Red Sea shipping.
Container traffic through Suez dropped 90% in 2024. Revenue collapsed to just $4 billion. Egypt’s Canal Authority began offering discounts of up to 75%, effectively competing with a trip round the Cape of Good Hope on price. A chokepoint toll, once challenged, turns out to be fragile.
Panama offers the opposite lesson: scarcity converted into permanent revenue extraction. When drought limited daily transits to fewer than 20 in late 2023, it introduced an auction system. A single slot sold for nearly $4 million – on top of normal transit fees. The auction system has stayed even after water levels recovered. What began as emergency rationing has become a permanent revenue-raising tool.
Limited by the Montreux Convention from charging actual transit tolls on the Bosphorus, Turkey raised dues it could levy (rescue services, lighthouse provision, and more) fivefold in 2022 and imposed proof-of-insurance requirements that created immediate traffic jams, giving it a de facto hold over Russian oil flows.
Erdoğan’s Istanbul Canal project – a parallel waterway outside Montreux’s scope – is designed to create a toll-paying alternative.
If Iran squeezes Hormuz, Egypt tolls Suez, Panama auctions canal slots, Turkey tightens the Bosphorus and the Houthis extract safe-passage fees at Bab el-Mandeb, the result globally is a return to the medieval Rhine.
Each toll-setter maximises their own revenue without regard to the cumulative effect on trade volume, collectively extracting more than a single monopolist would.
The original robber barons, but with missiles and Bitcoin wallets.
6. Toll Keen
The liberal order’s chokepoint settlements all followed the same logic: the dominant commercial and naval power bought out or suppressed local rent extraction to keep transit open as a public good. Britain paid a third of Denmark’s Sound Dues compensation. The US Navy patrolled Hormuz for decades. The cost was borne by the hegemon; the benefit was systemic.
The hegemon is not offering to buy out the toll-lord. It is offering to become one. A US-Iran ‘joint venture’ to charge tolls on Hormuz would mean the power that spent $6.8 trillion keeping the strait open now proposes to extract rent from the traffic it once protected.
This is not hegemonic decline in the conventional sense – the gradual loss of capacity to provide public goods. It is something stranger: the hegemon deciding that public goods provision is a bad deal and geographic rent extraction is a better one.
‘Joint venture’ is the vocabulary of a man who sees a chokepoint the way he sees a hotel site – a location where traffic can be converted into a concession fee. The medieval toll-lords at least had the excuse of feudal prerogative. This is the logic of the franchisee.
Fortune reported that Saudi Arabia quietly declined to renew its dollar-pricing commitment in 2024. Bloomberg declared in April 2026 that the petrodollar recycling loop ‘has been broken.’ Deutsche Bank warned that Iran’s acceptance of yuan payments for Hormuz transit ‘could be remembered as a key catalyst for erosion in petrodollar dominance.’
The system that made Hormuz worth patrolling – dollar-priced oil, Treasury-recycled surpluses, US control of clearing systems – is precisely what the toll regime undermines.
You can’t extract rent from a chokepoint and maintain it as the foundation of your currency’s global role.
The US kept Hormuz open not out of altruism but because it was the dyke protecting dollar hegemony. Tolling it is not a new revenue stream. It is breaching the levy.
7. Nobody is Writing the Cheques
The liberal order spent four centuries buying out chokepoint tolls. Each settlement required a power or a coalition that was willing and able to pay.
The US is shifting from public good provision to rent extraction. Gulf states, watching the power that promised protection bomb their principal customer’s neighbour and then propose to toll their export route, are hedging toward China.
Japan depends on Hormuz for 60-75% of crude imports, South Korea for 68-75%, and India for over 40% of oil and more than half its LNG. They have neither the independent naval capacity to keep the strait open nor the leverage to prevent tolling.
The insurance market has already raised prices: war risk premiums on hull values jumped from around 0.25% to as high as 10%, and all twelve International Group P&I Clubs cancelled war risk extensions in the Gulf.
Meanwhile, Saudi Arabia activated the Petroline to emergency capacity in early March – the first full-capacity test in its 44-year history. Gulf states are discussing bypass infrastructure. But diversification can take decades – compromise is quicker.
Nobody in the global system today has the standing, the interest, or the chequebook to do what Britain did in 1857 or America did in 1980 – pay the price of keeping the seas open.
Welcome to the new Middle Ages.
Thanks for reading!
Best,
Adrian