EU approves more subsidies to firms affected by the price increases of fuel and fertiliser due to the Iran war

EU competition regulators announced on Wednesday that the European Union would allow governments to spend more on subsidising businesses?affected? by soaring fuel prices and?fertiliser? prices triggered by war in Iran.

Businesses around the world have been affected by the increase in the price of oil and fertilizers following the closure of the Strait of Hormuz. This is a major shipping route.

The EU has responded by temporarily easing its rules on'state aid,' allowing governments to compensate companies involved in agriculture, fishing, rail, road and shipping within Europe for up 70% of fuel and fertiliser increases they have paid since the Iran War began two months earlier.

The Commission stated that these companies could receive up to 59,000 euros (50,000 Euros) under the "temporary rules" which would apply until the end the year.

Teresa Ribera, EU Competition?chief, said that the changes were aimed at "those industries that are most directly affected by fuel prices spikes and are more vulnerable to fuel price volatility".

The EU will allow governments to compensate heavy industry for up to 70% more of their electricity cost than they are currently allowed to do.

The rules are designed to prevent massive subsidies that strain public budgets, as happened in '2022, after Russia cut off gas supplies in the wake of its invasion of Ukraine.

According to the Jacques Delors Institute, many EU governments have spent more than 13 billion euro on subsidies to respond to the Middle 'East crisis. However, these measures are not directed at the hardest-hit communities or companies. Some governments are also concerned that the 'EU plans' could exacerbate divisions between rich and poor countries by mainly benefiting Germany. Foo Yun-Chee (reporting, Bart Meijer, and Keith Weir).

(source: Reuters)