While various world leaders have condemned Iran’s blockade of the critical Strait of Hormuz, Indonesian Finance Minister Purbaya Sadewa, speaking at an infrastructure symposium in Jakarta on 22 April, instead floated the controversial idea of tolling vessels passing through the Strait of Malacca – an equally vital waterway in Southeast Asia transited by around 25 and 30 percent of maritime trade and seaborne oil, respectively.
Sadewa’s statement immediately attracted international criticism, particularly from neighbouring Singapore and Malaysia, pushing Indonesian Foreign Minister Sugiono to reject Sadewa’s remarks and reaffirm Indonesia’s commitment to commercial ships’ freedom of navigation through international waters – a core provision of the United Nations Convention on the Law of the Sea (UNCLOS), to which Indonesia is a signatory. The international backlash to Sadewa’s comments also led Indonesian President Prabowo Subianto to reiterate his country’s commitment to maritime freedom during a meeting with Singaporean Prime Minister Lawrence Wong on 6 July.
The principle of freedom of navigation, enshrined in UNCLOS, guarantees commercial vessels safe and unrestricted transit through international waters. UNCLOS’ Article 38 defines merchant ships’ “right of transit passage” through natural physical chokepoints, and Article 44 specifically mandates that littoral states such as Indonesia may not impede any ships passing through international straits close to their maritime territory.
Adherence to UNCLOS by signatories like Indonesia (and even non-signatories like the US), who uphold freedom of navigation despite clearly having the power to exploit nearby chokepoints like the Strait of Malacca, has long allowed seaborne trade to flourish. Finance Minister Sadewa’s comments, even if hastily withdrawn and disavowed by his own president, have thus opened a new debate over the strength of the legal foundations that underpin modern international trade.
Peacetime disruptions: the new normal
Indonesia’s proposal reflects, at minimum, shifting global perspectives on the sanctity of international legal principles previously thought to be untouchable. Any proposal that challenges the recognized neutrality of the Strait of Malacca as a transit passage instantly raises questions regarding the perception of safety in doing commerce in other maritime chokepoints in the region.
Other than the Strait of Malacca, Southeast Asia is home to various critical maritime chokepoints, including the Sunda Strait, the Lombok Strait, and the disputed South China Sea (also known as the East Philippine Sea). Historically, Southeast Asia’s littoral states tolled or blockaded these chokepoints only in times of conflict. However, as geopolitical tensions intensify and physical chokepoints become volatile flashpoints, disrupting international waters has increasingly become normalised as a policy tool – even in times of peace.
For example, China has demonstrated its willingness to disrupt international waters in the South China Sea amid escalating tensions with Vietnam and the Philippines over disputed maritime territorial claims. According to the Center for Strategic and International Studies, China’s military activity in the South China Sea surged from 100 recorded operations in 2022 to 163 in 2025, including live-fire drills.
Sadewa’s informal comment on the possibility of tolling the Strait of Malacca is a long way from China’s outright military interference in the South China Sea/East Philippine Sea, in defiance of a 2016 ruling by the International Court of Justice invalidating China’s legal claim over nearly the entire sea. Yet his proposal signals an uncomfortably similar message: that the decades-old legal principles governing maritime trade and security can be challenged, delegitimized, and even ignored in peacetime.
Everyone bears the cost
Market players, including maritime risk insurers, commercial ship owners, and multinational firms reliant on global shipping, will undoubtedly factor in the new normal of peacetime maritime disruption into their practices and expectations. Heightened geopolitical risks that extend shipping timelines, disrupt fragile supply chains, and stretch demand for ocean-faring vessels will be reflected in higher insurance premiums and freight rates. Consumers will bear the costs of these disruptions, primarily reflected in higher market prices for consumer products, first.
Industries reliant on the transit of raw materials through physical chokepoints will also feel the economic impact of any disruptions of legally neutral international waters. Compared to the goods transiting the Strait of Hormuz, which are predominantly energy inputs like crude oil, natural gas, and liquefied natural gas (LNG), the goods being shipped through maritime chokepoints in Southeast Asia are more diversified. Container ships carrying general manufacturing goods and bulk carriers transporting raw materials respectively account for around 24 and 19 percent of total traffic through the Strait of Malacca, respectively, while oil tankers comprised roughly 29 percent of annual transit through Malacca in 2025.
A potential disruption or exploitation of the waterway could thus inflict more widespread economic costs to firms in the region than even the Hormuz crisis – reflecting the diversity and sheer volume of trade that flows through the Strait of Malacca.
Insurance risk and geopolitical disruption
The shifting “risk profile” of maritime insurance in the world’s critical physical chokepoints has already been illustrated by spiking war-risk premiums for vessels across the Middle East. Following the initial closure and blockade of the Strait of Hormuz, insurance premiums for commercial vessels soared nearly fivefold from 0.2–0.25 to 1–1.15 percent of hull value, while premiums for vessels in the Red Sea previously rose twentyfold from 0.05 to 1 percent of hull value after attacks on commercial ships by Yemen-based Houthi forces began in 2024.
Insurance markets are recognizing the heightened risk of passage through critical physical chokepoints – even in the absence of war. Responding to Finance Minister Sadewa’s proposal to toll the Strait of Malacca, Nigel Green, CEO of financial advisory deVere, described the emergence of a new ‘Malacca Premium,’ arguing that “the fact that tolls were even mentioned tells you everything about how the risk profile is changing.”
