Iran’s Threat to Tax Undersea Cables Under Strait of Hormuz: Realistic?

Undersea cables, the vital links of the global internet, could become a new flashpoint in tensions between the United States, Israel, and Iran, according to recent Iranian state-linked media reports.

Last week, Tasnim and Fars news agencies suggested Iran could leverage its control over the Strait of Hormuz, the 25-mile waterway between Iran and Oman, to charge U.S. tech companies for using internet cables that traverse the strait. Tasnim implied the move could net Iran hundreds of millions of dollars annually.

At least seven cables lie beneath the strait, many essential for the massive AI infrastructure buildout in Gulf countries. But the proposal raises questions: What exactly is Iran proposing, and is it realistic?

Tasnim’s proposal has three parts: charging foreign companies license fees for subsea cable use; requiring “technology giants”—naming Meta, Google, Amazon, and Microsoft—to “operate under the laws of the Islamic Republic of Iran,” likely through joint ventures; and monopolizing repair and maintenance of the cables. Iran says this will “transform the strait of Hormuz into a strategic hub for the generation of legitimate wealth.”

The proposal claims legal justification under Article 34 of the 1982 UN Convention on the Law of the Sea, which Tasnim says allows Iran to claim part of the seabed as its territory, even while surface waters remain for international navigation.

Tasnim cited Egypt as an example, which reportedly generates $250m to $400m annually by charging fees on subsea cables crossing its territory, and in some cases jointly owns cables via Telecom Egypt. But Doug Madory, an internet infrastructure expert at Kentik, said the key difference is that cables passing through Egypt actually cross its territory, often overland alongside highways.

Legal experts express doubt. A former U.S. State Department official specializing in global internet said sanctions considerations arise, and it would be impossible to charge specific companies because internet traffic cannot be separated by user. “The only way they could extract tolls for ships or submarine cables is through threats,” Madory said, adding that such an approach has no precedent.

Most cables in question do not terminate in Iran; they pass miles offshore under international waters. Cutting these cables would be challenging. “A suicide mission,” Madory said, noting that while recent cable cuts in the Baltic and Red Seas have sparked speculation about sabotage, most are accidents from dragging anchors. Iran lacks the technology to cut cables covertly under constant U.S. air patrols, so any attack would be overt.

A cable cut would disrupt internet traffic in the Gulf but might not affect global connectivity significantly, as the Strait of Hormuz cables mainly serve Gulf states, unlike the major Europe-Asia routes through Egypt. Iraq and Iran have alternative overland cables.

Cable cuts are routine—several per week—and over a dozen repair ships are always at work. However, if Iran threatened those ships, they might not risk repair. “Cable repair ships do not operate under fire,” Madory said, which could prolong any disruption.