US oil executives challenge White House over Iranian transit fees in Strait of Hormuz

US oil executives are challenging a White House proposal that would permit Iran to levy transit fees on vessels passing through the strategic Strait of Hormuz as a condition for peace negotiations.

A source familiar with the matter told POLITICO that oil companies have contacted the White House, Secretary of State Marco Rubio, and Vice President JD Vance to contest the arrangement.

“We’ve never had to do this before, and I thought we were winning the war,” said the source, who serves as a consultant to the oil industry. “Everywhere you have access to the administration, you ask, ‘What are you thinking?'”

The source added that the response from administration officials to industry representatives was not a “cold shoulder,” but rather a neutral acknowledgment: “It’s more like, ‘Yeah, okay, we’ll take note.'”

A person who attended the proceedings stated that petroleum sector representatives met with senior administrative staff at the State Department on Wednesday morning to voice their concerns.

Central to their grievances is that acceding to Iran’s demands would add a $2.5 million transit fee to every shipment, alongside higher insurance premiums—costs that would ultimately be passed on to consumers.

Industry representatives argued that granting Iran control over the Strait of Hormuz could set a precedent, potentially encouraging countries like Singapore and Türkiye to demand transit fees for key trade routes in the Strait of Malacca and the Turkish Straits. Furthermore, paying such fees could place companies in legal jeopardy for violating sanctions imposed on Iranian officials.

The person, speaking on condition of anonymity because they were not authorized to talk to the media, added that companies have also conveyed their concerns directly to Donald Trump, albeit in a more delicate manner.

“The President is extremely sensitive to the legacy and judgment regarding the success of this war, so pushing the President right now is seen as a risky venture,” the person said. “But the White House is listening to the voices from the sector, even though the conversations are polite.”

A White House spokesperson did not directly answer questions regarding whether the administration has received input from sector representatives or how it intends to address those concerns. Instead, the spokesperson referred to a Wednesday afternoon press briefing where White House Press Secretary Karoline Leavitt stated the administration is working with a “more reasonable” set of Iranian proposals.

Leavitt told reporters that Iran had presented “a more reasonable, completely different, and summarized plan to the President and his team,” though she did not specify what had changed in the proposal.

“The President’s red lines—namely, the end of uranium enrichment in Iran—have not changed,” Leavitt said. “And the idea that President Trump would accept Iran’s wish list as a deal is completely ridiculous.”

Iran is demanding that transit fees for tankers crossing the strait be paid in yuan or cryptocurrency.

Trump announced on Tuesday that the US would use Iran’s 10-point plan, which includes a $2 million transit fee per ship, as the foundation for a permanent ceasefire.

“I expect a serious reaction, not just from the oil industry,” said Jason Bennett, an attorney specializing in energy and international law at Baker Botts. “[Hormuz] is an open international waterway. To date, Iran’s legal right to control the Strait of Hormuz has never been recognized. I don’t think anyone will accept this.”

Foreign diplomats have also been expressing their concerns to the White House to the extent possible, despite complaining that the administration has shown little interest in their views thus far.

“Are Russian transit fees in the Arctic next? Chinese transit fees in the South China Sea?” said one Asian diplomat stationed in Washington. “My guess is there will be some kind of protest from the rest of the world, especially those who use the Strait.”

Other diplomats expressed concern that, if left to its own devices, Iran might charge some vessels while allowing others to pass for free as a “political favor.”

A second diplomat in Washington told POLITICO that “seven or more ships” flying the Malaysian flag were apparently able to pass through the Strait “seemingly for free.”

Most shipping companies are unwilling to pay the transit fees, arguing that such a system is unsustainable in the long term.

“The $2 million per ship transit fee included in Iran’s 10-point plan creates a new opportunity for blackmail,” said Arthur Leichthammer, a researcher at the Berlin-based Jacques Delors Center. “This would be an extremely costly concession, both politically and economically.”