Why is Iran exempting India, China, Qatar, Iraq from Hormuz restrictions?

Iran effectively shut the Strait of Hormuz early in the US-Israel war on Iran, which began on February 28, and the United States reimposed a naval blockade on Iran’s southern ports in July.

The Iranian parliament’s deputy chairman, Amir Hayat Moqaddam, told the Iranian Students’ News Agency (ISNA) that ships from India, China, Iraq and Qatar pass freely and are not intercepted by the Americans.

Moqaddam said Tehran will receive medicine from India and political backing from China, while collecting transit fees from Indian and Chinese ships, with Qatari vessels passing free.

Quid pro quo for passage

Iranian analyst Rouzbeh Parsi noted that while the lawmaker’s rationale is clear, the practical success of the exemption remains uncertain.

The exemption is a calculated move to generate revenue and poke holes in the international embargo, according to Nader Hashemi, an associate professor of Middle East politics at Georgetown University.

Security and defence analyst Wolfgang Pusztai explained that Iran is likely charging a percentage of cargo value to allow ships to pass without harassment.

Pusztai added that by including Qatar, which is leading mediation efforts to end the war, Iran is trying to undermine acceptance of Washington’s strategy, especially as it charges Qatar no tolls.

The move is also expected to generate significant revenue, as China is by far the largest purchaser of Iranian crude oil, buying nearly 90 percent of Iran’s total oil exports.

Strategic importance for exempt nations

For India, the shutdown of oil from the Gulf has been a great loss, and it is a big producer of the pharmaceuticals that Iran cannot manufacture itself.

Qatar, which is mediating between Washington and Tehran, shipped 1.8 million tonnes of LNG through the strait in October, while its crude transits fell from 517,000 barrels a day to 193,000.

Iraq’s crude transits rose from 1.69 million to 2.65 million barrels a day over the same period, though Kpler has been unable to trace the origin of up to two million barrels a day of Middle Eastern crude.

Rouzbeh Parsi suggested that India and Qatar have closer relationships with Washington and feel let down by former US President Donald Trump, while maintaining a relationship with Iran is vital for Qatar as an unavoidable neighbour.

Blockade and market impact

US Central Command (CENTCOM) has stated that the blockade applies to all vessels of all nations entering or leaving coastal areas or ports in Iran, while vessels avoiding Iranian ports are not affected.

Humanitarian shipments, including food and medical supplies essential for civilian survival, can pass after inspection, but the Iranian exemption is not limited to ships trading with other Gulf states.

Wolfgang Pusztai noted that if the exemption covers ships from these countries regardless of their trade partners, it could make the continuation of the American naval blockade more difficult and less effective.

The exemption has not guaranteed safety, as the Qatari LNG carrier Al Mayeda was struck by unidentified objects in the Gulf on October 30.

More than 120 commercial ships have been hit in the region since the war began, with October being the worst month, according to data from the International Maritime Organization and United Kingdom Maritime Trade Operations.

Chief market analyst at IG Group, Chris Beauchamp, said the exemptions make only a limited difference at present, as markets are back to pricing in a peace deal.

The exemption would also cover Chinese and Indian ships from and to Iran if Washington accepts it, but it is unclear whether the term “ships of these countries” refers to the flag, owner, or operator of the vessel.

Ending the blockade is one of Tehran’s demands before it will commit to broader peace talks with the US, which will include discussions about Iran’s nuclear programme.