EU allows more subsidies for firms hit by Iran war fuel, fertiliser price spikes
By Foo Yun Chee and Kate Abnett
EU Response to Fuel and Fertiliser Price Spikes
BRUSSELS, April 29 (Reuters) - The European Union will let governments spend more on subsidising companies affected by soaring fuel and fertiliser prices triggered by the Iran war, EU competition regulators said on Wednesday.
Impact of Strait of Hormuz Closure
The jump in oil and fertiliser prices following the effective closure of the Strait of Hormuz, a key shipping route, has disrupted businesses worldwide.
Temporary Loosening of State Aid Rules
In response, the EU will temporarily loosen its state aid rules, to let governments compensate companies in agriculture, fisheries, rail and road transport and shipping inside Europe for up to 70% of the fuel and fertiliser price increases they have paid since the Iran war began two months ago.
Compensation Limits and Duration
These companies can receive up to 50,000 euros ($59,000) under the temporary rules, which will apply until the end of the year, the Commission said.
Targeted Sectors
EU competition chief Teresa Ribera said the changes targeted "those sectors that are directly and most heavily affected by fuel price spikes, and that are particularly exposed to fuel price volatility".
Additional Support for Heavy Industries
Governments will also be able to compensate heavy industries for up to 70% of their electricity costs, rather than the 50% currently permitted under EU rules.
Rationale and Concerns
Avoiding Untargeted Subsidies
By selecting certain sectors, the rules aim to avoid massive, untargeted subsidies straining public budgets - which happened in 2022, when energy prices surged after Russia cut gas deliveries in the wake of its invasion of Ukraine.
Current Government Actions
Still, most EU governments have already moved ahead with subsidies in response to the Middle East crisis - spending more than 13 billion euros on fuel tax cuts and other measures, most of them not targeted to hardest-hit companies or communities, according to the Jacques Delors Institute think tank.
Potential for Deepening Divisions
The EU plans have also raised concerns among some governments that they could deepen divisions between wealthy and poorer countries, by mostly benefiting bigger countries like Germany.($1 = 0.8547 euros)
Reporting Credits
(Reporting by Foo Yun Chee, editing by Bart Meijer and Keith Weir)
