US President Donald Trump on Tuesday suggested investments from Gulf states would compensate for protecting commercial shipping through the Strait of Hormuz, reversing a pronouncement he made a day earlier to charge a 20 per cent toll on cargo.
In a post on Truth Social, Mr Trump said he replaced the charge after “highly productive conversations with Middle East leadership”. He said the “massive” investments would benefit the US and Gulf economies.
Mr Trump told reporters at the White House the investments would “primarily” be from the UAE, Saudi Arabia, Qatar, Kuwait and Bahrain, “then others”.
“They would love to invest more money in the United States at record amounts, and that would be very acceptable. And this way, there's no fee,” he said.
Mr Trump's latest about-face on Iran came just 25 hours after he announced on social media that the US would be charging a 20 per cent toll to offset the costs of providing safe shipping as “The Guardian of the Hormuz Strait”.
The proposal drew swift condemnation, with the UN International Maritime Organisation saying there was no legal basis for the toll plan. It also came after Secretary of State Marco Rubio had repeatedly said that no nation can legally charge a toll in the strait.
“No country is allowed to charge tolls or fees on an international waterway. That's existing international law,” he said last month in remarks that were widely recirculated on Monday.
Trump administration officials have tried to make a distinction between his idea of reimbursement for shipping protection and Iran's desire to charge a toll.
Mr Trump called it unfair “that we're protecting this strait for the entire world ... and we are not somehow compensated”.
A better compensation for protecting the strait, he said, was investments. He said the reversal came after calls with Gulf leaders.
“I put it out yesterday. I thought it was good. I was called by different people, different countries ... and they said we'd love to do it a different way,” he said, referring to the increased Gulf investment pledges.
Mr Trump also told reporters he spoke with officials in Bahrain, Kuwait, Qatar, Saudi Arabia and the UAE.
“I spoke to all of them, and they would love to invest more money in the United States at record amounts, and that would be very acceptable,” he said.
Karen Young, a senior research scholar at Columbia University's Centre on Global Energy Policy, said Mr Trump's Hormuz charge and subsequent reversal was more bluster than strategy.
“Investment expectations are not financial investment decisions by firms or funds. It seems like a way to save face,” she said.
Mr Trump's reversal also came hours before a new US naval blockade on Iranian ports took effect.
“The Trump administration is failing to articulate its plan for how to deal with Iran in the strait, with the region's partners, and even more vitally, in further negotiations on Iran's nuclear programme and its regional interventions,” Ms Young said.
He also did not detail what these investments from the Gulf would be.
“I think he suggested that [the investments] would be even bigger but he's vague,” said Rachel Ziemba, founder of Ziemba Insights.
Gulf states had already committed to investing trillions of dollars into the US before the Iran war broke out on February 28.
The UAE is making headway on its $1.4 trillion commitment, while Saudi Arabia boosted its commitment to $1 trillion during Saudi Crown Prince Mohammed bin Salman's visit to Washington last autumn. Qatar has its own $1.2 trillion “economic commitment” to the US.
“There is no ceiling as to what he will claim in terms of investments flowing in,” said Ryan Bohl, senior Middle East and North Africa analyst at the Rane Network. “The devil in these details is whether or not he checks up on those investments within a specific time frame.”
Oil reaction
Oil prices were mostly flat after initially jumping following Mr Trump's announcement that he was abandoning the toll. Brent, the international benchmark for crude, was trading at about $80.99 a barrel, similar to market close on Monday.
Mr Trump first pitched the plan to receive compensation for guarding the strait, through which a fifth of the global oil and gas supplies pass, on Monday. The UN's shipping agency said it opposed placing fees on passage through waterways but said it would wait for more details from the White House.
He made the announcement a few hours before the fee was due to come into effect.
“I don't think anybody should be able to charge a fee,” Mr Trump said. “I don't like the concept of a fee, but at the same time, it's not fair that we're protecting this strait for the entire world.”
He demanded a fee after Iranian attacks on commercial ships in the strait, where traffic has fallen to its lowest point in more than a month, according to Kpler data.
Mr Trump last week said the interim ceasefire between Washington and Tehran was over after Iranian strikes on ships in the strait. The agreement was supposed to outline steps to reopen the waterway, the effective closure of which for more than 100 days threatened the global economy.
