Red Sea Legal Letter * Issue 2

Note: beginning next week, an interactive map will site the events and trends across all of our columns — the Red Sea Brief, the Fragility Tracker, and the Legal Letter.

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Announcements Without Binding Authority

Two legal questions dominate this week, and each comes down to the same gap between a political announcement and actual legal authority. At Bab al-Mandeb, the Houthi ban on Israeli-linked shipping, restated the week before and reviving a charter-party and war-risk exposure that the spring pause had dampened, was left untouched by the new deal. On Hormuz, the negotiated reopening is unwinding the toll-and-sanctions structure that a year of designations built, by agreement between states rather than by a court. The announcements moved this week, and the United States–Iran memorandum was signed on 17 June, but the binding instruments that would clear the legal risk mostly did not. A client who acts on the announcement before the instrument is exposed.

The Houthi ban revives the charter-party problem

The question we had been tracking — whether the Israeli carve-out in the May ceasefire would turn into renewed attacks — was answered on 8 June, the week before this issue, when the Houthi military spokesman restated a complete ban on Israeli-linked shipping in the Red Sea and called any Israeli-linked vessel a target. The development for this week is that the 17 June memorandum left that ban untouched. Maritime-risk advisers had warned that both current and past Israeli ownership are at risk, and the few non-Israeli lines still running the route told their ships to delay and await instructions.

This revives the exact charter-party and war-risk problem we track. A test of who owns or once owned a ship — rather than what flag it flies — sweeps in flag-of-convenience and formerly Israeli-owned vessels whose charter contracts may never have allocated this risk. A declared total ban is the kind of event underwriters use to widen exclusions and owners use to claim a right to deviate, and because the memorandum left it in place, it now runs on its own track regardless of the wider de-escalation. Counsel for owners, charterers, and marine insurers on Red Sea fixtures should review ownership chains for current or past Israeli links, check how war-risk premiums are allocated, and record the 8 June declaration as the dated trigger for any deviation or extra-premium claim.

The Hormuz reopening turns the toll sanction into a transition trap

The legal basis of the Hormuz pressure structure — a coastal state charging for transit, formalized by Iran’s Persian Gulf Strait Authority and met by a 27 May United States designation under Executive Order 13224 — is now being unwound by agreement between states rather than by a court. The memorandum was signed electronically on 17 June and the first ships have crossed. But there is a timing trap between the political event and the legal one.

A toll-free reopening removes the transit charge that no straits-passage doctrine permits, yet the designation of the Strait Authority stays in force until the United States Treasury’s sanctions office (the Office of Foreign Assets Control, or OFAC) publishes a delisting, a general license, or a wind-down notice. As of 19 June, no such notice had issued, and Iran has signaled it will keep charging fees for services under a new arrangement managed jointly with Oman. Until OFAC acts, the announcement is a diplomatic fact, not a sanctions safe harbor — and an owner who treats the signing as authority to deal with the toll body is dealing with a blocked party.

The wording of the deal makes the trap worse rather than better. As Ethan Chorin sets out in “A Fantastical MOU” (The Middle East — Told Slant, 17 June 2026), the memorandum reportedly bans “tolls” but says nothing about the “service fees” — for navigation, security, and environmental protection — that Iran has spent months preparing to charge instead. That is not an accident of drafting. Iran wrote Hormuz fee collection into its own law on 30–31 March, before any draft text existed, and on the day the memorandum was signed its foreign minister said charges for services rendered would be collected as a condition of the deal. Because Iran has never ratified the United Nations Convention on the Law of the Sea (UNCLOS), it can argue the strait is its territorial sea rather than an international waterway, where such a charge would apply. For counsel the takeaway is sharp: a document that forbids the word while leaving the payment intact does not clear the sanctions exposure. An owner who pays a relabeled “service fee” to an Iranian or Revolutionary Guard–linked body is still dealing with a designated party, and the joint role written in for Oman — a Gulf host of United States bases that Washington has little reason to sanction — does not launder that exposure for the Iranian side of the charge.

Our network is skeptical that a clean exit is at hand. Michael Brill, reading the post-strike truce against the post-1991 Iraq parallel, warns that the deal is “entirely premised on financial incentives inducing cooperative Iranian behavior” and that the United States will likely have to stay militarily engaged to hold the ceasefire — meaning the sanctions architecture is unlikely to be dismantled quickly. He goes further on what a transit license would signal: it would, in his words, “demonstrate the unwillingness or inability of the US to prevent” Iranian control of the strait, a strategic outcome he likens to the Suez Crisis for the parties involved. The practical message for counsel: do not let clients treat the announcement as clearance; watch OFAC’s recent-actions feed for a delisting or a Hormuz-transit license; and preserve charter-party toll and detention clauses until a license issues.

Treasury closes the crypto settlement rail under the toll structure

On 2 June the Treasury designated Iran’s four largest crypto exchanges — Nobitex, Wallex, Bitpin, and Ramzinex — which together handled more than 70 percent of Iran’s 2025 crypto volume, and put the total United States crypto recovered from Iranian exchanges and wallets at roughly $1 billion. This matters for the Red Sea because it closes the most likely settlement route for a disguised Hormuz toll, which would otherwise most plausibly settle outside the dollar banking system through the same channels already used to move sanctioned Iranian oil.

How durable that closure proves depends partly on the deal. Michael Brill notes that “if sanctions are lifted and restrictions on Iran’s banking sector are eased, as stated in the [memorandum], crypto will become a less important means for facilitating oil sales,” though dubious non-Iranian exchanges would remain an option, especially if Washington returns to maximum pressure. On the home front, Romaric Jannel expects Tehran to portray the squeeze two ways at once — as American economic warfare against ordinary Iranians, to rally support, and as proof of resilience, showing its crypto infrastructure evaded sanctions for years. The practical point for compliance counsel is unchanged: re-screen any client touching Iranian crypto rails against the four named exchanges, and treat the disguised-toll-via-crypto route as a designated-entity exposure rather than a priced risk.

Two parallel sanctions tracks: United States designations and a European law-of-straits theory

The counterparty-block architecture ran its routine weekly cadence and gained a parallel European action built on a different legal theory. On 6 June the Treasury named six more Iran-linked liquefied petroleum gas carriers by hull number; each named-hull designation flows automatically into vessel-screening lists, charter sanctions clauses, bank checks, and insurance conditions. The European move is different in kind: on 8 June the European Council extended its Iran measures and listed the Hormozgan command of Iran’s Revolutionary Guard navy, stating that Iran’s conduct infringes the established rights of transit and innocent passage through international straits. This is the first Western-bloc Iran instrument grounded in the law of straits rather than in proliferation or human-rights authorities.

Our network is divided on what this precedent is worth. Michael Brill sees the deepest stakes: grounding a measure in navigation rights “speaks to the most alarming precedent set by this conflict — the unwillingness or inability of the US to enforce freedom of navigation,” and he judges that an Iran with Suez-style control over Hormuz could be “more consequential globally… than if the regime obtained a nuclear weapon,” because it would invite copycats at other chokepoints such as Malacca. Nasser bin Nasser reads the European listing more narrowly: it reinforces the bloc’s rule-of-law position and “sets a precedent for future sanctions provisions based on freedom of navigation, which could be enacted elsewhere,” with little effect on the proliferation track. Romaric Jannel calls the move strategically ambivalent — useful leverage against Iran’s maritime coercion, but a possible distraction from arms control unless the two tracks are integrated. For counsel, the practical effect is that a single passage can now face listed counterparties under two separate legal theories at once. A signed Hormuz reopening does not retroactively cure dealings with vessels already on either list.

Two enforcement endgames maturing in United States courts

United States prosecutors moved to sell a seized tanker through a court-supervised process while forfeiture continues, after the vessel unloaded Iranian crude in Texas, and a shadow-fleet captain pleaded guilty after a long Coast Guard chase. This builds a court-based recovery track alongside the older administrative-license route, and a court-supervised sale produces clean title and a public record a later buyer can rely on. Michael Brill notes the limit of this approach: with roughly one in five tankers globally tied to the dark fleet or sanctioned cargo, even a tougher United States posture “cannot target all of them,” for reasons of manpower, the cost of holding seized ships, and the complexity of forfeiture. The early sign of a coming seizure, in his reading, is a vessel already named in a built-up sanctions case. Owners of vessels with any Iranian-cargo history nonetheless face real seizure and forced-sale exposure in United States ports.

Separately, QatarEnergy’s gas force-majeure declaration — first issued in March after missile strikes knocked out two LNG production trains at Ras Laffan, about 17 percent of Qatar’s export capacity — ran through mid-June with no published ruling. Most Gulf supply contracts run under English or New York law, where relief turns on the qualifying event being the real cause of non-performance and on the seller having tried to limit the damage. Two dates now bracket that fight. The 27 May designation put the legal impossibility of a lawful toll-paid transit on the public record, cutting against a seller’s late-signed excuse; and the signed toll-free reopening removes the qualifying event going forward, so any force-majeure notice issued after the deal faces a harder argument. The clean window for a force-majeure claim is narrowing from both ends. Counterparties should date their positions precisely and watch for the first arbitral award, which would move this from an open question to settled guidance.

A note from one contributor bears on the whole picture. Nasser bin Nasser cautioned that Iran obtained significant concessions before talks even began, and warned that if Tehran retains its highly enriched uranium and concedes nothing on its nuclear program during the 60-day window, “we are likely to be witnessing another round of hostilities” — a reminder that every legal position built on the reopening rests on a ceasefire that is not yet a settlement.

Watch over the next one to two weeks

• Whether OFAC issues a Hormuz-transit license or delists the Strait Authority, which would turn the reopening from a diplomatic fact into legal authority.

• Whether the first arbitration ruling on a Hormuz-linked supply dispute issues.

• Whether the Houthi ban produces a documented deviation or extra-premium dispute that tests the ownership trigger in a real charter contract.

• Whether the 60-day nuclear negotiation holds, given the warning that a failure could reopen hostilities and reset every position above.

Contributors to this issue

Fatima Abo Alasrar is a Yemen-focused policy and security analyst and MENA Director at Cure Violence. A former Mason Fellow at the Harvard Kennedy School and policy fellow at the Open Society Foundation, she advised the Embassy of Yemen in Washington from 2006 to 2012 and writes The Ideology Machine on Substack.

Michael Brill is a Ph.D. candidate in Near Eastern Studies at Princeton University, where his dissertation examines Iraqi Baʽth Party founder Michel ʻAflaq. A former Global Fellow at the Wilson Center and Non-Resident Fellow at the U.S. Air Force Academy’s Institute for Future Conflict, he holds an M.A. in Arab Studies from Georgetown.

Ethan Chorin is Founder and CEO of Red Sea Futures and a former US diplomat and Middle East analyst with more than 25 years on Red Sea issues. He is the author of four books on the region, including a forthcoming history of the Red Sea (Harvard University Press), holds a Ph.D. from UC Berkeley, and writes The Middle East—Told Slant on Substack.

Romaric Jannel is a philosopher specializing in ethics, artificial intelligence, and comparative philosophy, with research on trust, responsibility, and agency. He is a Program Director at the Collège International de Philosophie in Paris and a Visiting Researcher at Ritsumeikan University in Japan. He holds a Ph.D. from the École Pratique des Hautes Études–PSL University, and writes the Philosophy and Beyond Substack.

Sarah Deardorff Miller is an expert on refugee, migration, and humanitarian issues. She holds a doctorate in international relations from Oxford University, teaches displacement and humanitarian response at Georgetown University, and is a senior fellow at Refugees International. Much of her research focuses on the Horn of Africa and the global refugee regime.

Nasser bin Nasser is a Middle East security expert and entrepreneur who founded Ambit Advisory in 2022. He serves as Senior Advisor to UNIDIR, leading research on ballistic missiles, drones, and weapons of mass destruction, and previously directed the Middle East Scientific Institute for Security in Jordan. He holds an M.A. from Princeton University.

Robert Springborg is a Research Fellow at the Italian Institute of International Affairs and Adjunct Professor at Simon Fraser University. He has held the MBI Al Jaber Chair in Middle East Studies at SOAS and directed the American Research Center in Egypt, and has authored numerous books on the political economy of Egypt and the MENA region.

Red Sea Futures is a hybrid intelligence consultancy that combines a network of regional experts with a proprietary analytical platform. Each weekly product begins as a structured signal harvest, is reviewed by experts in the relevant fields, and is then refined for publication.

The Red Sea Legal Letter is a summary of a longer Red Sea Futures report, one of our paid columns alongside the Red Sea Fragility Tracker. The full report is available to Founder subscribers on Substack, or by writing to info@redseafutures.com. For bespoke analysis and consulting, visit www.redseafutures.com.

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