Long read: The Cartaz Remix: The Hormuz Gambit and the Emergent Montreux of the Gulf

Some might blame this week’s breakdown of the ceasefire in the Persian Gulf on Trump’s volatile decision making while some on the Iranian’s lack of trustworthiness. This paper in the Observer Research Foundation, a think tank highlights a specific legal quirk that justifies actions from both sides. More importantly, the paper highlights historical instances of how the then powers used geography as leverage and Iran is working of that playbook. Indeed, the author argues that there was never a rules-based order and that is important to understand how geopolitics is going to pan out. “Customary international law is not a gift of reason to humanity; it is precedent codified by whoever held the power at the time. The powerful party wrote the rule, and the rule outlasted the power that created it.”

So, what is the quirk of law which allows both sides to be right and wrong? They are just looking at different agreements, one that suits them conveniently. The US goes by the United Nations Convention on the Law of the Sea (UNCLOS) – under whose rules of transit passage, “…warships may transit in ‘normal mode’—submarines submerged, aircraft overflying, radar systems active—and the coastal state has no right to suspend or impede passage.… Iran rejects this framework and instead relies on the 1958 Geneva Convention on the Territorial Sea and the Contiguous Zone, which applies the doctrine of “innocent passage”. Under this principle, a coastal state may suspend transit if it deems a vessel’s passage “prejudicial to its peace, good order, or security. Crucially, “innocent passage” requires submarines to surface and fly their flags, prohibits military aircraft overflight, and allows the coastal state to stop and inspect vessels it deems threatening. The United States and Iran are therefore engaged in legally irreconcilable conduct every time a US warship transits the Strait”

And this isn’t the first time in history a country has used geography as leverage. Indeed, Hormuz itself was choked by the Portuguese half a century ago: “…Afonso de Albuquerque trained his guns upon Hormuz in 1507 and invented the Portuguese cartaz (licence)…The Estado da India was built not on the conquest of vast territories, but of the chokepoints of this trade—Hormuz, Malacca, Goa, and Aden. The enforcement of cartaz was explicit, systematic, and brutal; it became the prototype of coercive maritime governance. Today, the geopolitics of the twenty-first century appear to have reverted to this structural reality with a ferocity that would have been the delight of medieval colonialists.”

The author refers to how Copenhagen tolled the Danish Straits for four centuries till Britain, Russia and the US (an exception to the UNCLOS) agreed to compensate Denmark for free transit in future.

Another example he cites is how Turkey leveraged the Bosphorus straits to align with the allies under the Montreux convention: “To understand where the Hormuz crisis is going to end, one probably needs to see where Türkiye’s Montreux gambit began and where it now stands. The mechanics of the Montreux Convention also worked because they rejected legal idealism for raw realism. Türkiye did not merely “get the keys” to the Bosphorus in 1936; it demonstrated a strategic template that Iran is now attempting to replicate, one in which a geographically pivotal state converts its physical position into permanent immunity from the consequences of great-power rivalry.”

And Turkey exercised its choke as recently as the beginning of the Ukraine war: “… On 28 February 2022, Türkiye invoked Article 19 to officially recognise Russia’s invasion of Ukraine as a state of war and declared the Straits closed to warships of all belligerent parties. Russia’s powerful cruisers—stranded in the Mediterranean, legally unable to reinforce a Black Sea Fleet being methodically destroyed by Ukrainian maritime drones—became a wasted asset.”

Not just naval access to the Black Sea but since the closure of the Ukrainian gas transit route, Turkey has established itself as a gas hub by mixing sanctioned Russian and Iranian gas with that from Azerbaijan to supply to Europe as Turkish gas.

“The energy hostage and the naval kill-switch operate in concert, converting geography into permanent leverage over the North Atlantic Treaty Organization (NATO), the European Union (EU), and Russia alike. US approval of F-16 modernisation kits for Türkiye’s air force is not a reward for democratic values but a retainer fee—a cartaz paid to the geopolitical landlord who controls the most strategically valuable real estate in Europe. It is another fortress model Iran must have examined with all diligence due.”

The author sees Iran’s choke as a response to the US leveraging the SWIFT interbank messaging services which Iran was cut off from: “…Excluding a nation from SWIFT not only freezes its ability to trade globally but amounts to a virtual siege, sentencing its population to economic starvation…Both actions, one in the virtual and the other in the real world, mirrored each other as blatant economic coercion: both designed to inflict civilian suffering and both deploying the architecture of interdependence as a weapon. The US called its instrument “sanctions enforcement” and Iran, “self-defence”—neither was wrong or right, and that became the problem.”

Indeed, Iran sees the sanctions itself as an act of war referring to UN resolutions: “…When such sanctions deprive civilians in Iran, Afghanistan, or Syria of medicine, food, and other essential goods, sanctioning states invite the charge of aggression. On that basis, Iran argues that restricting traffic through the Strait is a lawful countermeasure rather than a provocation. This argument is no longer frivolous; it has gained traction across parts of the Global South, where many view the use of SWIFT against Russia, Iran, and Venezuela (but not against Israel over Gaza and Lebanon) as evidence that the so-called rules-based order is applied selectively by the wealthy against the poor.”

Furthermore, the author sees Iran’s attacks on its neighbours as a legal right as well: “…Under the Hague Conventions, a state that allows its territory to be used for the transit of troops, munitions, or as a base of operations against another forfeits its neutral status. Qatar’s Al Udeid Air Base, Bahrain’s Fifth Fleet headquarters, and Kuwait’s Camp Arifjan are thus arguably co-belligerents in any US-Iran conflict. Iran uses this as a basis for declaring naval blockades against their ports and stopping vessels destined for them, while maintaining that it has not blocked neutral commerce.”

Whether Iran’s legal defences hold or not, the authors point is we need to think about geopolitics not in terms of any fantasised rules-based border but chokepoints – virtual, physical or trade (America’s Nvidia chips or Chinese rare earth magnets).

If you want to read our other published material, please visit https://marcellus.in/blog/

Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.