Iran Threatens New Subsea Cable Fees, Risking Digital Chokepoint in Strait of Hormuz

Tehran's move to charge tech giants for subsea cable access threatens to create a new chokepoint in a waterway vital to global data traffic, potentially disrupting everything from financial markets to AI development.

Iran is threatening to impose fees on technology giants like Google and Meta for subsea internet cables passing through the Strait of Hormuz, a move that could disrupt global data flows and grant Tehran new leverage over the world’s digital infrastructure.

“We will impose fees on internet cables,” Iranian military spokesperson Ebrahim Zolfaghari said on the social media platform X last week, signaling a new pressure tactic in the strategic waterway.

The plan, reported by media linked to Iran’s Revolutionary Guards, would require companies to pay licensing fees and give exclusive repair and maintenance rights to Iranian firms. At least seven major subsea cables run through the strait, a critical chokepoint for data connecting Europe, Asia, and the Persian Gulf. A disruption could affect not just internet speeds but also banking systems, military communications, and the AI cloud infrastructure crucial for regional development.

While US sanctions make it unlikely that American tech firms would comply, the real threat lies in Iran’s ability to delay or block cable repairs, potentially turning minor faults into prolonged outages. With the Red Sea route already facing disruptions, any new instability in the Strait of Hormuz could create a cascading digital catastrophe, slowing financial transactions and jeopardizing data-dependent economies from the UAE to India.

A New Front in Digital Geopolitics

Tehran’s proposal argues that its authority aligns with the 1982 United Nations Convention on the Law of the Sea (UNCLOS), which grants coastal states control over cables in their territory. However, Iran has signed but not ratified the treaty, and legal experts note the Strait of Hormuz's status as a natural maritime passage differs from artificial waterways like the Suez Canal, where Egypt does charge transit fees.

The move is widely seen as an attempt by Iran to assert its influence over the strait, a chokepoint for about 21% of global oil trade. “Iran’s threats are part of a strategy to show its leverage over the Strait of Hormuz,” Dina Esfandiary, Middle East lead at Bloomberg Economics, told CNN.

For the high-tech economies of the Persian Gulf, the threat is particularly acute. The UAE, Saudi Arabia, and Qatar have invested heavily in data centers and AI, all of which depend on the uninterrupted flow of data through the very cables Iran is targeting. Two specific cables, the Falcon and Gulf Bridge International systems, are known to pass through the waterway, according to research firm TeleGeography.

A senior researcher at the UAE-based Habtoor Research Center, Mostafa Ahmed, warned that an attack by Iran's Revolutionary Guards—using combat divers, small submarines, or underwater drones—could trigger a “cascading digital catastrophe.” Beyond the Gulf, India’s multi-billion dollar outsourcing industry could face significant disruption, and parts of East Africa could experience internet blackouts.

This article is for informational purposes only and does not constitute investment advice.