Brussels eases aid rules to counter Iran war fuel crisis

The European Union will ease its strict state aid rules to help fuel-dependent sectors cope with surging energy prices and other economic effects of the crisis in the Middle East, the European Commission announced on Wednesday.

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The emergency, short-term measures will allow national governments to subsidise up to 70% of the extra cost of fuel and fertilisers for farmers, fishing firms and road transport carriers.

The measures are “a targeted, temporary and proportionate response that will help to shield European businesses from the immediately felt effects of the Middle East conflict,” EU Commission Vice President Teresa Ribera said on Wednesday.

Since the start of the war – which has effectively closed the Strait of Hormuz – farmers have struggled with high fertiliser and fuel costs, while fishermen have been weighing whether each trip on the high seas is worth the fuel it consumes.

Transport companies have also struggled with the price surge, choosing either to absorb the costs, pass them on or scale back operations. Energy-dependent industries across Europe are seeing production lines slow as electricity prices rise.

Ribera said the Commission would now allow EU countries to subsidise heavy industry by offsetting up to 70% of energy costs compared with the current 50% allowed under state aid rules.

Governments can tailor their aid to businesses based on local needs, while small hauliers, farmers and fishermen can access a fixed payment of up to €50,000 with minimal administrative burden, Ribera said.

“The framework enables governments to grant state aid for mitigating the immediate adverse effects on the most exposed European businesses, while preserving a level playing field in the Single Market,” Ribera said.

Officials say businesses should see the financial support within the next two months, although the speed of the payouts will depend on national governments.

Rules aimed at level playing field

EU state aid rules typically prevent national public authorities from giving grants, loans, or tax breaks to particular companies when this could distort competition. The aim is to safeguard a level playing field among EU countries.

The new measures, in place until the end of December, will let governments step in with financial lifelines like grants, tax relief and state-backed guarantees, with recipients only required to estimate costs rather than provide detailed proof.

“Each individual beneficiary does not need to provide individual receipts from the petrol station,” an EU official said.

However, there are fears that the new measures allowing government intervention could lead to a distorted EU market: critics say it will largely favour the larger member states with the fiscal capacity to help their businesses, notably Germany.

Germany has been the biggest beneficiary of loosened EU state aid rules, accounting for around half of all approved aid since 2022, according to Commission data. In 2022 alone, it allocated €73.67 billion – about a third of the EU total – and maintained similarly high spending in 2023. This level of support far exceeds that of France and Italy, raising concerns about a potential subsidy race across the EU.

Ribera said that state aid cannot be justified if there is no market disruption to be addressed, and added that today’s announcement is a “response to what has been asked at the highest political level and from the capitals”.

She added that the crisis and the fuel surges showed that the energy transition remains “the most effective strategy for Europe’s autonomy, growth and resilience”.

“Nevertheless, the recent spikes in energy prices require an immediate response,” she said, adding that the new rules will allow for “easily applicable solutions”.

Nonetheless, Greg Van Elsen, senior industrial policy coordinator at the NGO Climate Action Network Europe, suggested the measures may incentivise more demand for natural gas.

“These temporary Clean Industrial State Aid Framework changes risk spending billions subsidising fossil-based energy costs instead of accelerating Europe’s clean industrial transition,” Van Elsen told Euronews.

He suggested that the absence of decarbonisation conditions made it “a short-term fix”, rather than a structural solution for energy-intensive industries.