Paying ransom will not reopen the Strait of Hormuz

The hidden costs will bleed the global economy dry

[Credit: Sheila Sund]

By Allan C. Stam

Since the war in Iran began on February 28, commercial traffic through the Strait of Hormuz has ground to a halt. The economic shock is global — oil prices spiking, LNG cargoes rerouted, fertilizer and helium supply chains frozen — but the weight of that shock does not fall evenly. The United States, now the world’s largest producer of crude and natural gas, feels the squeeze mainly at the pump. Europe, Japan, South Korea, and China feel it in their factories, their power grids, and their heating bills.

The more contested question is who is keeping the Strait closed. On and off for 40 years, the default answer was Iran — the regime whose mines, fast-attack boats, and proxy drones have periodically turned the waterway into a shooting gallery. That default no longer holds. In a matter of weeks, the Trump administration has moved from insisting that European and Asian consumer nations help secure free passage through the Strait to authorizing what amounts to selective U.S. interception of traffic through it — converting the world’s most critical maritime chokepoint from a shared international asset into an instrument of American leverage. The stated aim in Washington is ambitious: regime change in Tehran, or, failing that, a fundamental rewrite of Iran’s nuclear program and its sponsorship of regional proxies.

European capitals want none of that. UK Prime Minister Keir Starmer told reporters he prefers “to keep the straits open, not shut,” adding that “it is vital that we get the strait open and fully open” — though, tellingly, Starmer refused to blame President Donald Trump personally for Britain’s surging energy costs. French President Emmanuel Macron pressed “the need to restore free and unimpeded navigation through the Strait of Hormuz as quickly as possible.” Spain’s defense minister, Margarita Robles, dismissed the premise of a blockade outright—a plan, she said, that “makes no sense.” Notice what none of these statements proposes. None mentions altering Iran’s behavior. None endorses the American price of admission. They want the cargo moving again — full stop.

Why are European and East Asian governments focused on reopening the Strait rather than on confronting the regime that started the interdiction in the first place — or, for that matter, on resisting the administration now escalating it? The answer begins with a less flattering question: How have these same governments historically handled the problem of paying ransom for hostages?

To best anticipate how European and East Asian governments will behave, one must look beyond traditional military analysis and employ a behavioral analogy: a hostage situation. The Strait of Hormuz — and the vital oil, liquified natural gas, helium, and fertilizer that transit through it — is a hostage. Iran, through decades of mining, seizing tankers, and harassing commercial shipping, is the hostage-taker. The consumer nations are the hostages’ families, receiving the ransom demands. The Trump administration, by moving from guaranteeing free passage to selectively interdicting it, has added a second source of pressure on the hostage and its families. But Washington’s leverage is a symptom of the crisis, not its cause. The party whose behavior created the hostage situation — and whose behavior must change for the Strait to be reliably open — is Iran.

When Iran attacks commercial shipping, seizes tankers, or threatens to mine the Strait, it is engaging in strategic hostage-taking designed to extract maximum concessions without triggering full-scale war. Iran need not seal the Strait entirely — it merely needs to raise insurance premiums, reduce flows, and charge transit fees born of the fear of being targeted. The “ransom” Tehran seeks is multifaceted: relief from economic sanctions, the unfreezing of billions in foreign accounts, diplomatic tolerance of its nuclear enrichment program, and unchallenged regional hegemony.

To understand the potential impact of the US intervention in the Hormuz Strait, one must understand how the United States assumed responsibility for this hostage in the first place. Following the British withdrawal from the region in 1971, the U.S. relied on the Nixon Doctrine’s “Twin Pillars“ policy, providing security through proxies—heavily arming Saudi Arabia and, most crucially, Imperial Iran under the Shah—to act as local enforcers protecting the free flow of oil.

This proxy strategy violently collapsed in 1979 with the Iranian Revolution, transforming the primary Gulf policeman into the primary hostage-taker. The resulting chaos triggered a global energy crisis; Americans waited in miles-long lines for rationed gasoline. Shortly thereafter, the Soviet Union invaded Afghanistan, placing the Red Army within striking distance of the Gulf.

In response, President Jimmy Carter delivered his defining 1980 State of the Union address, establishing the Carter Doctrine: “An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.” This doctrine fundamentally changed the course of Middle East history. It birthed the Rapid Deployment Joint Task Force, which evolved into U.S. Central Command (CENTCOM), and led to the permanent stationing of the U.S. 5th Fleet in Bahrain. The U.S. shifted from relying on proxies to becoming the direct, kinetic guarantor of the Strait.

The U.S.-led war against Iran is, in practice, a proposition to kill off the Carter Doctrine. To understand why an American president would suggest abandoning a decades-old security paradigm, one must analyze how drastically U.S. dependence on the Persian Gulf has changed since 1980. Then, the hostage held in the Strait of Hormuz was the United States. Today, the hostage nations are almost exclusively Europe, China, Japan, and South Korea.

This drastic shift in vulnerability exposes a profound asymmetry. In the 1980s, the “insurance premium” the United States paid to keep the Strait open was astronomical: the creation of CENTCOM, the deployment of carrier strike groups, and being drawn into the 1980’s Tanker War. But because America’s economic stability depended on Gulf oil, paying this premium made strategic sense.

Today, the United States is still paying this massive premium, yet the beneficiaries have completely changed. The U.S. 5th Fleet is spending tens of billions to intercept drones and missiles to protect shipping lanes through which much of the oil destined for China—America’s primary strategic rival —is transported. Trump’s frequent statements demanding that U.S. allies participate fully in managing security in the Hormuz Strait highlight this striking asymmetry: Why is the American taxpayer funding the geopolitical insurance for Beijing and Berlin?

For over 40 years, Europe and East Asia have under-contributed to the security of their own energy lifelines. Japan and South Korea host American bases and contribute financially—but hosting is not the same as deploying. Writing checks is not the same as putting your sailors’ lives at risk in the Strait of Hormuz. China contributes nothing at all. If the U.S. unwinds CENTCOM’s maritime mandate, these nations face a binary choice: aggressively build and deploy their own blue-water navies or pay the ransom to Iran.

To predict how consumer nations are more likely to respond, consider their actual behavior in literal hostage situations. The United States and the United Kingdom generally maintain strict no-concession policies rooted in long-term deterrence. But countries such as France, Germany, Italy, and Spain have historically paid tens of millions in ransoms to terrorist organizations—prioritizing the short-term survival of the hostage over the long-term incentive structure. This pattern suggests that when faced with Iranian extortion at the Strait, many consumer nations are far more likely to treat the crisis as a business expense to be managed than as an act of aggression to be defeated.

China is already modeling this approach. Beijing signed a 25-year strategic cooperation agreement with Iran in 2021—though the widely reported $400 billion headline figure remains largely aspirational, with actual Chinese investment in Iran amounting to a small fraction of that sum. Nevertheless, the strategic signal is clear: bilateral deal-making to secure preferential treatment, rather than collective security to confront the extortionist. If other consumer nations follow this template, the result is a balkanized Gulf where each nation negotiates its own protection arrangement with Tehran—enriching the hostage-taker with every transaction.

If consumer nations believe that paying geopolitical ransoms will pacify Iran, they are ignoring a glaring historical warning provided by the United States’ experience. During the Lebanese Civil War, Hezbollah—funded, trained, and directed by Iran’s IRGC—systematically kidnapped American citizens in Beirut. Desperate to secure their release, the Reagan administration engaged in a secret arms-for-hostages deal, covertly facilitating the sale of more than two thousand TOW anti-tank missiles and HAWK anti-aircraft missiles to Iran.

Did this deal pacify Iran? Just the opposite. It made things demonstrably worse. In exchange for the missiles, Hezbollah released three American hostages—Benjamin Weir, Lawrence Jenco, and David Jacobsen. But having learned that kidnapping Americans yielded invaluable military hardware, Iran directed Hezbollah to kidnap three more—Frank Reed, Joseph Cicippio, and Edward Tracy. The net reduction in American hostages was zero. The long-term damage was immense: The Iran-Contra scandal deeply damaged the Reagan presidency, while Iran received advanced weaponry and learned the strategic lesson that Western powers can be extorted. Treating hostage-taking as a transaction did not end the crisis; it established an infinite loop of extortion.

The same dynamic played out at sea. When Somali pirates began hijacking commercial vessels off the Horn of Africa in the late 2000s, the shipping industry responded exactly as one would predict: They paid the ransom. Insurance companies activated kidnap-and-ransom policies, and millions in cash were parachuted onto the decks of hijacked freighters. The result was catastrophic moral hazard.

Ransom money transformed localized piracy into a transnational criminal enterprise—Somali warlords bought faster skiffs, heavier weapons, and even established a pirate “stock exchange” where civilians could buy shares in upcoming expeditions. The crisis only ended when a military coalition—including the EU’s Operation Atalanta and Combined Task Force 151 under CENTCOM—aggressively patrolled the corridors and armed security contractors were placed on commercial decks. It was force and deterrence, not appeasement, that broke the syndicates.

If consumer nations lack the political will to confront Iran and instead opt to pay the ransom, the hidden costs will bleed the global economy dry in ways that dwarf the immediate premium.

First, the ransom funds the hostage-taker’s empire. When consumer nations enrich Iran to keep the Strait open, that money flows directly to the IRGC. The IRGC uses those funds to build Shahed drones sold to Russia and used to bomb European allies in Ukraine. The ransom money arms Hamas and Hezbollah, ensuring perpetual warfare in the Levant. Consumer nations would literally be funding the weapons used against their own allies.

Second, appeasement breeds geographic expansion. By proving that maritime extortion works in the Strait of Hormuz, Iran has already exported the model to the Red Sea via its Houthi proxies. The Houthis are currently holding the Suez Canal route hostage. Because the international community has hesitated to mount a comprehensively devastating response against Houthi infrastructure, the Houthis continue to dictate global trade flows—a second chokepoint, a second ransom.

Trump’s move is not a retreat from the Carter Doctrine; it is an inversion of it. The American guarantee of free passage through the Strait has become, in a matter of weeks, an American instrument for coercing Tehran as well as our allies in Europe and our allies and adversaries in East Asia. The reckoning this forces on consumer nations is nonetheless the one that has been building for four decades: the United States is no longer the energy-starved nation that drafted the Carter Doctrine, and it is no longer rational for the American taxpayer to act as the sole underwriter for the geopolitical insurance of its economic rivals.

When the Strait—and its invaluable cargo—is viewed as a hostage, the behavioral history of Europe and Asia provides a dark but historically consistent pattern. Plagued by domestic vulnerabilities and an aversion to sustained military risk, countries that historically pay ransoms to terrorists are far more likely to pay ransoms to Tehran. Nevertheless, as the catastrophic failure of Reagan’s arms-for-hostages deal proved, paying the ransom does not pacify the extortionist—it merely replenishes their inventory. If consumer nations adopt the cynical mechanics of hostage insurance and view Iranian extortion as a standard business expense, they will fund their own geopolitical demise—fueling radical proxies from Yemen to Lebanon while the gun remains permanently pointed at the global economy.

Allan C. Stam is a Miller Center senior fellow and Distinguished University Professor at the University of Virginia. He is the former dean of UVA’s Frank Batten School of Leadership and Public Policy.