EU Plans Temporary Market Measures to Address Iran War Impact

The European Commission said Monday it is consulting member states on a draft proposal to relax state aid limits, aimed at protecting market competition, in response to spikes in energy prices brought about by the Middle East war.

The State Aid Temporary Crisis Framework aims "to address the effects of the crisis on some of the most exposed sectors of the economy, such as agriculture, fishery, road transport and intra-EU short sea shipping", the Commission said in an online statement.

"The draft proposal also includes a temporary adjustment to the Clean Industrial Deal State Aid Framework (CISAF) allowing for higher aid intensities to address electricity price spikes".

Specifically European Union governments would be allowed to cover part of price increases, compared to before February 28, for fuel or fertilizers.

The temporary framework would also permit member states to grant "a limited amount of aid per company (except for EU short sea shipping)", the Commission said.

The proposal also includes "an increased maximum aid intensity for the electricity costs for energy-intensive industries under Section 4.5 of the CISAF, above the existing maximum of 50 percent".

The Commission said future plans to mitigate the impact of the Iran war on energy prices may include subsidizing the fuel cost of gas-fired generation.

Since the start of the war over a month ago, the EU's bill for fossil fuel imports has risen by over EUR 22 billion ($25.93 billion) without any addition in volumes, Commission President Ursula von der Leyen said in a separate statement Monday.

"And even if hostilities ceased immediately, the disruptions to energy supplies from the Gulf will persist for some time to come", von der Leyen said. "Therefore, we also discussed a series of measures that we will present to leaders at the next informal EUCO [European Council meeting] in Cyprus next week".

Von der Leyen said that as part of efforts to hold down power prices, changes have been proposed to the Emissions Trading System. "We are stopping the cancellation of allowances, and we are boosting the firepower of the [Market Stability Reserve]", the Commission president said.

Next month legislative proposals on electricity taxes and grid charges would be presented, von der Leyen added.

In a meeting last week the Energy Union Task Force Security assessed that crude supplies to EU refineries were "stable" and there was no need for additional oil reserve releases.

The meeting took place before Iran-United States talks on the weekend that only resulted in Washington sending its own blockade to the Strait of Hormuz. U.S. President Donald Trump said on social media platform Truth Social the blockade would start April 13.

A statement by the Commission last Friday about the Energy Union meeting said that while crude supply remained stable, "prolonged disruptions in Middle East oil production and tanker traffic could pose longer-term risks".

"Jet fuel remains the primary concern, given that EU refineries cover around 70 percent of the EU's consumption, with the remainder reliant on imports", the Commission said.

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