As part of a package of emergency measures, the EU is to subsidise up to 70% of the extra cost of fuel and fertilisers caused by the Iran war for farmers, fishing businesses and road hauliers.

Individual companies can claim up to €50,000 each between now and the end of the year with minimum paperwork, a measure the EU hopes will remove what it sees as an existential threat to hauliers and farmers. Energy-intensive industries including steel, chemicals or even rail firms, will be able to claim up to 70% of the extra electricity cost of eligible consumption.

Oil and gas prices surged during the US-Israeli war against Iran that began in February, with fertiliser prices shooting up by 61% in March alone after supplies of urea and fuel were choked off by the blockage of the strait of Hormuz.

Announcing the measures, the European Commission Vice President, Teresa Ribera, said that they could be the difference between “survival or giving up” for many businesses. “I want to reassure European citizens, national governments and European institutions are monitoring and are ready to react in cases when it is needed,” she said.

The EU said that the loosening of state aid rules was an emergency measure aimed at helping those in agriculture and fisheries, including aquaculture, as well as transport – covering road, rail and inland waterways, plus intra-EU short sea shipping.

No relief has been offered to airlines and airports regarding jet fuel, but potential future intervention has not been ruled out. Individual member states can configure the state aid they offer businesses according to local conditions, but small hauliers, farmers and fishers will be able to claim the fixed amount of up to €50,000, with minimal fuss.

They will not, for example, need to provide receipts for fuel at petrol pumps. Although the scheme raises the risk of fraud, the EU has said it believes the problems facing small- and medium-sized businesses after the sharp rise in costs since the war on Iran mean a light-touch approach is necessary.

Last week, the Energy commyissioner, Dan Jørgensen, said that the crisis could last up to two years; the time it would take Qatar, for example to rebuild bombed gas plants.

The French fossil fuel multinational TotalEnergies said that its net profit rose 51% in the first quarter of the year to $5.8bn, drawing criticism from politicians as well as climate and consumer groups.

French Prime Minister, Sébastien Lecornu stated that the company must find a way to redistribute the huge profits it has made on the back of the Iran war oil crisis. “TotalEnergies must, one way or another, take a stance on how to distribute, and potentially in the most effective and rapid way possible,” he said.

Antoine Bouhey, the Campaign Coordinator at Reclaim Finance, said, “TotalEnergies’ war profits highlight our persistent dependence on fossil fuels, whose soaring prices once again benefit shareholders at the expense of consumers.” Greenpeace France denounced what it called “cynical logic” while “households pay the high price at the pump.”

A Targeted And Temporary Framework

The European Commission said the Middle East crisis temporary state aid framework (METSAF) would be a “targeted and temporary framework to address the crisis in some of the most exposed sectors in the economy.”

It will be in place until 31 December, underlining assessments made in Brussels that even if the US and Iran struck a peace deal today, oil and gas prices would remain high for many months.

Some concerns have been raised that the subsidies in the form of grant aid could increase the demand for fossil fuels and compromise the EU’s target to transition to renewables. However, Ribera defended the move, pointing out the measure was short term.

“Achieving a clean economy is what will shield us from the energy crises of the future. 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.”
Teresa Ribera

She added that the METSAF allows for easily applicable solutions that will sustain the continuous development of core EU sectors such as agriculture, fishery and transport, “by cushioning the effects of the crisis.”