Indonesia Rejects Malacca Strait Tolls as Neighbours Defend Free Passage

Jakarta rules out charging ships to pass

Indonesia has rejected a proposal to charge ships passing through the Strait of Malacca, a route carrying approximately 25 to 30 percent of globally traded goods and roughly 23.2 million barrels of oil each day. Foreign Minister Sugiono said on April 23 that such levies would violate international law, closing down speculation a day after Finance Minister Purbaya Yudhi Sadewa raised the idea at a symposium in Jakarta.

Purbaya had suggested Indonesia could follow Iran's example at the Strait of Hormuz and share potential revenue with Malaysia and Singapore. His proposal was preliminary, and he acknowledged that putting it into practice would be complicated. Nevertheless, it prompted concern about access to one of the world's busiest shipping corridors.

Sugiono, speaking to reporters in the Indonesian capital, said Jakarta remained committed to freedom of navigation. He described an open shipping route as a shared interest among countries using it.

We also hope for free passage, and I believe this is a shared commitment among many countries to create a shipping lane that is open, neutral and mutually supportive," he stated. "So, no... Indonesia is not in a position to do that.

President Prabowo Subianto has urged officials to think more aggressively about earning revenue from Indonesia's strategic location and national resources. The finance minister's suggestion and the foreign minister's rapid rejection revealed tensions within his administration over how far that approach should go.

By April 24, Indonesia had also rejected participation in a proposed multinational naval mission at Hormuz. Together, the two decisions showed Jakarta protecting free passage through its own neighbourhood while maintaining neutrality over the conflict affecting another major maritime route.

What international law requires

Sugiono based his rejection on the United Nations Convention on the Law of the Sea, known as UNCLOS. The 1982 treaty sets out maritime rights and responsibilities, including the rules governing passage through international straits.

Indonesia has recognition under the treaty as an archipelagic state. That status recognises its sovereignty over waters between its islands, while also requiring it to respect passage through designated sea lanes without impediment. Sovereignty therefore comes with obligations to vessels travelling through those waters.

Transit passage allows ships to move through a strait used for international navigation. Charging a vessel simply because it passes through is different from charging for an optional service, such as something a ship chooses to obtain at a port.

Dr Izyan Munirah Mohd Zaideen, a maritime policy expert, explained where she considered the legal boundary to lie.

A transit toll is a charge for merely passing through, while maritime service charges are for optional services. This is the legal line that cannot be crossed," she said. "Any forced levy carries high risk as it could trigger legal and diplomatic conflicts.

Singapore's Foreign Minister Vivian Balakrishnan made the same principle explicit during a parliamentary session earlier in April. He described transit passage as a right belonging to ships from every nation.

is not a privilege granted by bordering states. It is not a licence to be subjugated at all. It is not a toll to be paid. It is a right of all nations' ships to traverse.

UNCLOS was therefore central to Indonesia's rejection. Regional agreement would also matter to any change in management of the shared waterway, but the treaty's protection of passage is a legal obligation that neighbouring governments must respect.

Malaysia and Singapore defend shared control

Malaysia and Singapore opposed unilateral changes to the Strait of Malacca, stressing that a single country cannot decide policy for a waterway shared with its neighbours. The strait extends approximately 900 kilometres, making cooperation across national boundaries a practical requirement as well as a diplomatic concern.

Malaysian Foreign Minister Mohamad Hasan said at a forum in Kuala Lumpur on April 22 that Malaysia, Singapore, Indonesia and Thailand had a "watertight understanding" about the strait. He described consultation among all four countries as essential.

Whatever is to be done in the Strait of Malacca must involve the cooperation of all four countries," he declared. "That is our understanding - it cannot be done unilaterally.

The approach reflects the diplomatic tradition of the Association of Southeast Asian Nations, or ASEAN, where decisions require agreement among members. The four countries already conduct joint patrols to maintain security, through a mechanism established specifically to avoid a unilateral military presence in the sensitive waterway.

Singapore delivered the strongest rejection of restrictions. Balakrishnan told a CNBC event on April 22 that the city-state "will not participate in any attempts to close or interdict or to impose tolls in our neighborhood." Interdicting shipping means stopping or obstructing vessels as they travel.

More than 130,000 vessels call at Singapore's ports each year. Its economy depends entirely on maritime trade, and its position as the world's largest transshipment hub makes continued access particularly important. Transshipment means moving cargo from one vessel to another so it can continue to its destination.

For Singapore, restrictions on the Malacca route would threaten the maritime connections underpinning that role. Malaysia's insistence on consultation and Singapore's defence of passage placed immediate regional limits on the Indonesian finance minister's suggestion.

How the proposal unfolded

Purbaya raised the toll idea on April 22 by comparing Malacca with Hormuz. Ships using Malacca pass without a transit charge, while Iran had begun collecting fees at Hormuz following weeks of conflict with the United States and Israel.

The Indonesian finance minister suggested dividing any proceeds among Indonesia, Malaysia and Singapore, while recognising that the proposal remained complicated and preliminary.

"If we split it three ways - Indonesia, Malaysia, and Singapore - it could be quite substantial," he suggested.

The debate developed alongside wider decisions about maritime security and alternative transport routes. The key dates were:

• April 13: Indonesia and the United States signed a Major Defence Cooperation Partnership.
• April 20: Thai Deputy Prime Minister Phiphat Ratchakitprakarn announced plans to accelerate a land bridge connecting the Andaman Sea and the Gulf of Thailand.
• April 22: Purbaya suggested Malacca transit fees, while Mohamad and Balakrishnan defended regional cooperation and free passage.
• April 23: Sugiono rejected the toll proposal, and Philippine Foreign Secretary Theresa Lazaro said ASEAN had not formally discussed the straits of Malacca and Singapore.
• April 24: Sugiono said Indonesia would not join a naval mission proposed by the United Kingdom and France to safeguard shipping at Hormuz.

Why Hormuz shaped the debate

Iran's toll regime at the Strait of Hormuz has disrupted global energy flows since February. Payments were reportedly being collected in Chinese yuan or cryptocurrencies, bringing the financing of passage into a conflict already affecting international trade.

The closure of Hormuz forced Asian economies to reassess the security of alternative routes as oil prices climbed above $106 per barrel. Purbaya's suggestion brought that anxiety into Southeast Asia by proposing that another essential passage could become a source of transit revenue.

Indonesia's expanding defence relationship with Washington added to regional concern. The Major Defence Cooperation Partnership signed on April 13 raised worries among some regional observers about a greater American military presence near the Strait of Malacca.

Sugiono nevertheless maintained Indonesia's neutrality over the Hormuz crisis. On April 24, he announced that Jakarta would not participate in the multinational naval mission proposed by the United Kingdom and France to protect shipping there.

The foreign minister said participation would "violate our neutral stance" and contradict Indonesia's "free and active" foreign policy doctrine. His decision placed a limit on Indonesia's involvement even as disruption at Hormuz affected the energy security of Asian economies.

Hormuz supplied the immediate example behind the toll proposal, while Malacca's shared governance and legal protections shaped the response. The debate linked two geographically separate passages through the same practical concern: whether ships carrying essential goods can continue travelling without new restrictions or charges.

A narrow passage with enormous economic weight

The Strait of Malacca links the Indian Ocean with the Pacific and carries container ships, oil tankers and bulk carriers. More than 200 vessels transit daily, with annual traffic exceeding 90,000 ships.

Approximately 25 to 30 percent of globally traded goods move through the route. Its petroleum traffic, roughly 23.2 million barrels a day, exceeds the volume passing through the Strait of Hormuz. That combination makes Malacca central to both merchandise trade and energy supplies.

Near Singapore, the passage narrows to just 2.7 kilometres at its tightest point and has an average depth of 25 metres. The restricted space creates a natural bottleneck, where navigating safely is demanding even without political interference.

A transit toll would add a new expense to the movement of goods through that bottleneck. Dr Aizat Khairi of Universiti Kebangsaan Malaysia explained that the effects would extend beyond finished products carried in containers.

The impact is not only on consumer goods containers, but also industrial inputs, imported food and energy supply chains. Ultimately, the cost is passed on to importers, manufacturers, retailers and consumers.

Factories relying on imported materials, businesses buying energy and retailers stocking food would all face the consequences described by Aizat. The economic issue is therefore wider than the payment made by a shipping company: transport costs can travel through the chain of businesses handling a product before it reaches a customer.

Singapore's more than 130,000 annual port calls illustrate the scale of activity surrounding the route, while the strait's more than 90,000 annual transits describe traffic moving through the passage itself. Both figures show why neighbouring governments reacted quickly to a suggestion that could affect routine shipping.

China's dependence on Malacca

China is particularly exposed to disruption because approximately 80 percent of its oil imports pass through the Strait of Malacca. In simple terms, about four out of every five barrels of oil it imports depend on this route.

Former Chinese President Hu Jintao identified this vulnerability in 2003, giving rise to the term "Malacca dilemma". The concern is that dependence on a narrow maritime passage could allow rival powers to put pressure on China's energy supply.

Chinese officials have long treated the strait as essential to national energy security. That concern has prompted investment in alternative pipelines and renewable energy to reduce dependence on maritime supplies.

The toll debate brought an economic version of that vulnerability into view. A charge on passage would affect the cost of using the route, while a blockade or military disruption could affect access itself. For China, both concerns centre on the concentration of so much imported oil in one passage.

Thailand advances a $31 billion alternative

Thailand has treated uncertainty over maritime routes as an opportunity to advance a proposed land bridge between the Andaman Sea and the Gulf of Thailand. Deputy Prime Minister Phiphat Ratchakitprakarn announced on April 20 that Bangkok would accelerate the plans.

The project would cost 1 trillion baht, approximately $31 billion, and connect seaports through road and rail networks. Its proposed benefits include cutting transit time by four days and reducing shipping costs by 15 percent.

Phiphat argued that the Middle East conflict had demonstrated the strategic value of operating a transport route between major bodies of water.

The Middle East conflict has demonstrated the advantage of controlling a transport route," Phiphat stated. "Thailand will have a great advantage by operating the link between the Pacific Ocean and the Indian Ocean.

The land bridge offers a less radical alternative to the long debated Kra Canal. That canal would have cut across the narrowest part of the Malay Peninsula, but repeated proposals were abandoned because of enormous projected costs and environmental concerns.

A land bridge would instead move cargo between ports using land transport, providing a bypass of the Malacca bottleneck. Concerns about disruption to maritime routes have given the concept new relevance, with the potential to divert substantial cargo volume away from the strait.

The four days and 15 percent are projected benefits of the proposal. No completion date was given. Thailand's announcement concerned accelerating plans, making the project a prospective alternative while ships continue to rely on existing routes.

Military risks extend beyond transit fees

The 110th anniversary this year of the Gallipoli campaign provides a historical reference for the strategic importance of narrow waterways. During the 1915-1916 First World War operation, Allied forces tried to seize the Dardanelles Strait to gain access to the Black Sea and suffered immense casualties.

The campaign's failure illustrated how control of a passage can shape military outcomes and economic flows. Analysts at the Lowy Institute warn that similar strategic pressures could affect Malacca in a future conflict involving China, Taiwan and the United States.

The possible scenarios include blockades or maritime exclusion zones restricting access, mines or submarines preventing vessels from using an area, precision strikes against port infrastructure, and attempts to capture land bordering the waterway.

Control of adjacent land can help a military force control the sea beside it. Seizing coastal territory along Peninsular Malaysia, Sumatra or Singapore could allow a force to deny access and dominate key routes, echoing the relationship between land and sea demonstrated at Gallipoli.

The neighbouring states may declare neutrality, but that position requires credible military deterrence to discourage interference. Their joint patrol framework has been effective against piracy, yet it may be insufficient against competition involving major powers. The security challenge therefore extends beyond keeping commercial traffic moving during ordinary conditions.

Indonesia balances ambition with neutrality

Prabowo has instructed his administration to seek a larger role in global trade and think more "offensively" about using national resources. Indonesia's location gives it substantial strategic influence over a passage on which other economies depend.

Sugiono's rejection of Malacca tolls and the Hormuz naval mission showed the continuing strength of Indonesia's traditional "free and active" doctrine, known as bebas aktif. Established during the Cold War, the policy mandates nonalignment and neutrality in major power conflicts.

Euan Graham of the Australian Strategic Policy Institute observed that Prabowo has shown a willingness to pursue deals against his own foreign ministry's advice. He suggested that the toll proposal may have been a "trial balloon", an idea floated to test the regional reaction.

Parts of Indonesia's government view strategic opportunities differently from Western partners. The brief toll debate exposed those differences while also showing the legal and diplomatic constraints on turning geography into revenue from passing ships.

Philippine Foreign Secretary Theresa Lazaro said on April 23 that ASEAN had not formally discussed the straits of Malacca and Singapore. The grouping's attention remained on energy security, food security and protecting its nationals.

As of April 24, the four neighbouring countries appeared committed to maintaining free passage and cooperative security patrols. Indonesia's foreign minister had rejected the proposed toll, while Malaysia and Singapore had publicly defended shared decision making and the right of ships to traverse the route.

Key Points

• Sugiono rejected Malacca transit tolls on April 23, citing Indonesia's obligations under UNCLOS.
• Purbaya proposed sharing possible toll revenue among Indonesia, Malaysia and Singapore after pointing to Iran's fees at Hormuz.
• Malaysia demanded cooperation among all four neighbouring countries, while Singapore rejected closures, interdiction and tolls.
• Malacca carries more than 90,000 ships annually, approximately 25 to 30 percent of globally traded goods and roughly 23.2 million barrels of oil daily.
• Approximately 80 percent of China's oil imports pass through the strait.
• Thailand is accelerating plans for a land bridge costing 1 trillion baht, about $31 billion, with projected savings of four days and 15 percent in shipping costs.
• Indonesia declined the proposed Hormuz naval mission on April 24, maintaining its free and active foreign policy.