The European Union has temporarily relaxed state aid rules to give countries more opportunities to subsidize companies most affected by rising energy and raw material prices amid the conflict in Iran. This was reported by Bloomberg, according to UNN.
Details
The European Commission stated on Wednesday that the move is intended to ensure that "the growth of the most vulnerable companies is not irrevocably disrupted by the current crisis," and will remain in effect until the end of the year.
The recent spikes in energy prices require an immediate response
The relaxation of state aid rules is a common practice for the EU during crises. Similar changes were previously introduced during the COVID-19 pandemic and at the beginning of the war in Ukraine.
A feature of the latest changes is the permission for governments to provide more financial assistance based on actual consumption to "cover part of the increase in fuel or fertilizer prices," the EU executive branch reported.
The changes will allow governments to direct more funds into agriculture, fisheries, and transport, as well as energy-intensive industries, the European Commission added.
The EU is under pressure to maintain the competitiveness of its industry while simultaneously trying to offset inflationary pressures and rising oil prices due to tensions in the Middle East and uncertainty regarding the Strait of Hormuz. No region in the world produces more oil and gas than the Persian Gulf countries, and most of these exports are transported by tankers through the Strait of Hormuz.
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However, some officials, including Teresa Ribera, warn that excessive national support for companies could disadvantage smaller and poorer countries with fewer financial resources. Historically, Germany and France have accounted for a significant share of state aid projects submitted to the EU executive body for review.
High energy prices were already among the bloc's top political priorities even before the escalation of the conflict in the Middle East, which affected global energy supplies. Since the start of the conflict, EU spending on fossil fuel imports has increased by more than 22 billion euros ($25.7 billion), European Commission President Ursula von der Leyen recently stated.
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