U.S Will Use Iranian Funds To Pay For Ship Damages In Strait Of Hormuz, Trump Announces
Our take
The recent announcement by the U.S. government regarding the utilization of frozen Iranian assets to compensate for damages to vessels in the Strait of Hormuz represents a significant, albeit complex, development in the ongoing geopolitical tensions surrounding maritime security. The decision, framed as a means of addressing escalating incidents in critical waterways, underscores the escalating risks faced by commercial shipping in the region. These risks are further highlighted by recent events, such as the attack on a Saudi-owned vessel in the Red Sea Saudi-Owned Vessel Catches Fire After Attack In Red Sea and the persistent threat of piracy, as evidenced by the situation involving the MT Asana Somali Pirates Seen Taking Food To The Crew of Hijacked Ship MT Asana. The potential legal and logistical challenges of seizing and distributing these funds are considerable, but the signal sent regarding the protection of commercial interests is undeniable.
The scale of the frozen assets—estimates placing the total between $24 billion and $100 billion—provides a substantial pool for potential compensation, though the precise amount allocated to maritime damages remains to be seen. This situation interacts with broader shifts in global shipbuilding and maritime alliances, as demonstrated by the recent expansion of U.S. partnerships with Korean shipbuilders Korean Shipbuilders Expand US Partnerships With 15 New Shipbuilding Projects. These collaborations aim to strengthen naval and commercial shipbuilding capacity, indirectly addressing some of the security vulnerabilities exposed by incidents in the Strait of Hormuz and beyond. The move also carries implications for international trade law and the enforcement of sanctions, potentially setting a precedent for the use of frozen assets to address damages caused by state-sponsored or state-affiliated actors. The legal framework surrounding such actions remains untested on this scale, and anticipated challenges from Iran are likely.
The strategic importance of the Strait of Hormuz cannot be overstated. As a vital chokepoint for global oil and LNG transit, disruptions to maritime traffic have cascading effects on global energy markets and international trade flows. The escalating incidents—ranging from attacks on commercial vessels to piracy—indicate a growing instability that demands a multifaceted response. While the U.S. action offers a potential avenue for compensation to affected parties, it does not address the underlying causes of the tension. A purely reactive approach risks perpetuating a cycle of escalation, demanding a more proactive strategy encompassing diplomatic engagement, enhanced maritime domain awareness, and collaborative security initiatives involving regional and international partners. The use of frozen assets, while potentially effective in specific cases, should be viewed as one tool within a broader framework.
Looking ahead, the success of this policy hinges on its legal defensibility and the ability to navigate the complex geopolitical landscape. The international community will be closely observing the implementation of this initiative, assessing its impact on international law and the efficacy of sanctions enforcement. A crucial question remains: will this action deter future attacks, or will it be perceived as a provocation, further destabilizing the region and potentially incentivizing alternative, less traceable methods of disruption? The long-term consequences for maritime security and the stability of global energy markets will depend on the broader context and the responses of all involved parties.
U.S. President Donald Trump said on Thursday the United States would use Iranian funds under its control to pay for damage to ships, cargo and related property.
“Please let this statement serve to represent, until further notice, that from this point forth, any and all damages done to Ships, Cargo, or anything related thereto, will be paid for by Iranian Money that the United States has in its possession, and controls,” Trump wrote on Truth Social.
“These damages may be very substantial but, nevertheless, this is the fair and equitable thing to do,” he added.
Trump did not say how the payments would work, which incidents would qualify or whether shipping companies would be compensated directly.
Billions of dollars in Iranian assets remain frozen under U.S. sanctions, although estimates of the total amount range from about $24 billion to $100 billion, with much of the money held outside the United States.
Trump made the remarks as U.S. forces continued strikes on Iranian targets and Washington warned it would hold Tehran responsible for any future Houthi attacks on commercial shipping.
The U.S. president said Iran and the Houthis would face “major military punishment” if the Yemen-based group carried out more attacks on ships, calling the Houthis an Iranian “surrogate and/or proxy.”
The warning followed the Houthis’ claim that they attacked two Saudi oil tankers, Encelia and Layla, using ballistic missiles, cruise missiles and drones. The group said the vessels had violated a naval blockade on Saudi-linked shipping.
Saudi state media later reported that the attack caused a fire on the bow of Encelia, while all crew members were reported safe. Maritime security reports said the tanker issued a distress call after being struck near Saudi Arabia’s Jizan port.
The Houthis also said they had closed the Bab el-Mandeb Strait to Saudi-linked shipping in response to Saudi Arabia’s blockade on Yemen and a recent attack on the international airport in the rebel-held capital, Sanaa.
The group has also warned shipowners not to send vessels to Saudi ports.
The attacks have increased concerns about shipping security in the Red Sea, adding to disruptions in the Strait of Hormuz.
The Strait of Hormuz, which links the Persian Gulf with the Gulf of Oman, is one of the world’s busiest energy shipping routes and carried about one-fifth of global energy supplies before the conflict. Traffic through the waterway has slowed sharply as fighting has intensified.
The Bab el-Mandeb Strait, connecting the Red Sea with the Gulf of Aden and the Indian Ocean, is another key maritime route that normally handles around 12% of global trade.
The growing security risks in both waterways have raised concerns over longer shipping routes, higher freight costs, rising war-risk insurance premiums and additional pressure on global energy markets.
War-risk insurance costs for ships transiting the southern Red Sea have increased sharply following the latest Houthi attacks, according to maritime insurance market data.
Brent crude rose above $100 a barrel on Thursday for the first time in almost two months as concerns over supply disruptions grew. Several tankers also changed course after Houthi warnings against vessels sailing to Saudi ports.
Trump also told Axios he was considering a “massive attack” on Iran and was “close to making a decision”. U.S. Central Command later said it had launched a 13th consecutive night of strikes targeting Iranian military capabilities and threats to commercial shipping.
CENTCOM said the strikes targeted Iranian military operations centres, maritime capabilities, aircraft hangars, drone storage facilities and military logistics infrastructure. It also said U.S. forces struck bridges that Washington says are used to resupply an Iranian naval base near the Strait of Hormuz.
The command said it had redirected 12 commercial vessels and disabled another ship since the United States reintroduced its blockade of Iranian ports. The U.S. military has also deployed additional aircraft, special operations forces and medical personnel to support its operations.
Iran warned it would retaliate against regional infrastructure, including energy facilities, if Washington expanded its attacks. Iranian Foreign Minister Abbas Araghchi also criticised Trump’s proposal to use frozen Iranian assets to compensate for shipping damage.
“Seizing another nation’s assets to pay for unrelated future claims is an incendiary precedent,” Araghchi wrote on Friday.
“Those who celebrate or profit from such funds should remember: once governments normalise confiscation, no one’s assets are safe. Ensuing chaos will not be pretty or peaceful,” he added.
References: Euronews, AA
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