Every day, around 23.7 million barrels of oil pass through a narrow sea lane in Southeast Asia. This volume exceeds the Strait of Hormuz, the Suez Canal, and every other maritime choke point on Earth.
That route is the Strait of Malacca, an approximately 805 kilometer stretch between the Malay Peninsula and the island of Sumatra, connecting the Indian Ocean to the Pacific. Nearly 40 percent of global maritime trade depends on it, and more than 102,500 vessels pass through it every year.
If there were a single point on the planet that most logically deserves a “toll gate” from an economic perspective, the Strait of Malacca would be the leading candidate. Yet there is no toll there. Not a single cent.
An Unnegotiable International Law of the Sea
The answer lies in one document: the United Nations Convention on the Law of the Sea, or UNCLOS. The Strait of Malacca is classified as an international strait, a natural sea lane that connects two exclusive economic zones.
Within this category, the regime of transit passage applies as stipulated in Articles 37 and 38 of UNCLOS. All ships and aircraft enjoy the right of passage that cannot be obstructed, suspended, or subjected to charges simply for transiting the strait.
The obligations of coastal states are legally binding, with mandatory dispute settlement mechanisms in place if these rules are violated.
This is where the fundamental difference with the Suez Canal and the Panama Canal lies. Both canals are man made, operated by a single state within its own territory, which gives the managing state the right to impose tariffs.
The Suez Canal charges hundreds of thousands of dollars per transit because of its status as artificial infrastructure under Egypt’s full sovereignty. The Strait of Malacca was formed by nature, and this difference in origin, under international maritime law, determines everything.
Indonesia, Malaysia, and Singapore do have sovereignty over their respective territorial waters up to 12 nautical miles from their coastlines. However, all three are bound by the same obligation: they cannot stop, suspend, hinder, or impose charges on vessels that are merely passing through.
All three countries have long acknowledged this, and in 1971 they even established a tripartite framework called the Tripartite Technical Experts Group to jointly manage the strait.
Here’s the full translation, keeping the structure, subheadings, and substance intact, and without using em dashes:
Why No One Dares to Violate It
A natural follow up question is this: what if one of the three countries decided to impose a tariff?
Such a scenario would hurt the actor more than anyone else. Ships would divert to alternative routes, the Sunda Strait or the Lombok Strait, both still within Indonesian waters, adding 1,000 to 1,500 nautical miles and an extra three to five days of travel.
Global logistics costs would rise, consumer prices would follow, and the country imposing the tariff would face diplomatic pressure from nearly all major economic powers that rely on the strait, from China, Japan, and South Korea to European countries.
Moreover, for Indonesia in particular, UNCLOS is not merely a limiting framework. The concept of an archipelagic state recognized under UNCLOS forms the legal foundation of Indonesia’s territorial integrity, granting sovereignty over more than 3 million square kilometers of archipelagic waters.
For Malaysia and Singapore, freedom of navigation is a condition for survival in economies that depend heavily on maritime trade flows. Singapore, located at the southern entrance of the strait, is the busiest transshipment port in the world, handling more than 40 million containers annually and serving as the largest bunkering hub on the planet.
This means that the three countries are not only legally bound, they also have a strong economic interest in keeping the strait free and open.
A Vast Potential That Has Not Been Fully Captured
The inability to impose tolls does not mean the region cannot extract greater value from its geographic position. In reality, Southeast Asia is still far from optimal in capitalizing on the trade flows passing right in front of it.
Singapore is the exception. The city state’s port already handles around 39 million TEUs per year from the region’s total transshipment flow. Malaysia follows with Port Klang, which processes about 14 million containers annually and ranks among the ten busiest ports in the world.
Meanwhile, Indonesia, whose exclusive economic zone covers roughly 70 percent of the waters of the Strait of Malacca, had captured less than 5 percent of the strait’s transshipment value as of the end of 2025.
This gap is now being actively pursued. Indonesia is developing three major port projects: Kuala Tanjung in North Sumatra, the Batu Ampar and Tanjung Sauh area in Batam, and Sabang in Aceh as a deep sea port at the northern entrance of the strait.
On the other hand, Malaysia continues to strengthen the position of Port Klang while developing Carey Island Port as a long term capacity expansion.
The competition to capture a share of the region’s logistics value is, in essence, another way of “collecting tariffs” not by stopping ships at a boundary, but by becoming a destination that ships cannot afford to bypass in a route where they already have no alternative.
