The consequences of the war in the Middle East could last for months or even years. That is the diagnosis being considered in European institutions, where they estimate that the Union has already incurred 27 billion euros in unforeseen costs, a figure equivalent to approximately 500 million euros per day. This economic impact, largely derived from energy volatility and tensions in key trade routes such as the Strait of Hormuz, has forced Brussels to accelerate its response.
For this reason, the European Commission has taken a further step in its strategy to alleviate the effects of the war in the Middle East on the pockets of European companies and citizens. The Community Executive is now committed to introducing the necessary flexibility for Member States to be able to subsidize companies in the sectors most affected by the closure of the Strait of Hormuz and by the increase in energy supply costs.
In line with what was proposed by several States during the last summit of European leaders in Cyprus, Brussels has proposed the creation of a new program that will allow companies that meet certain requirements to receive compensation of up to 70% of the increase in costs related to fuel and fertilizers.
Administrative simplification and greater scope of aid
This initiative is accompanied, according to the communication released this Wednesday, by a series of measures aimed at simplifying application processes, especially for small businesses. Likewise, higher aid limits are contemplated for sectors with high electricity consumption, which represents additional relief for industries particularly exposed to energy market fluctuations.
The objective of the Commission is twofold: on the one hand, to ensure that aid quickly reaches those who need it most; on the other, to prevent bureaucracy from hindering the reaction capacity of national economies in the face of a global crisis.
For the Executive Vice-President of the Commission, Teresa Ribera, a “clean economy” is the key to protecting Europeans from future energy crises. In this regard, she maintains that the energy transition remains the most effective strategy to strengthen Europe’s autonomy, growth, and resilience.
However, during a press conference held this Wednesday, Ribera acknowledged that the recent increase in energy prices demands an immediate response. “This framework allows for easily applicable solutions that will support the continuous development of key sectors of the EU, such as agriculture, fishing, and transport, cushioning the effects of the crisis,” she stated.
A timeline subject to review
In any case, this is a temporary measure that will be in effect until the end of the year. During that period, Commission services will periodically monitor the content, scope, and duration of the framework, depending on how events unfold in the Middle East and the general economic situation.
The new temporary framework is designed to support the resilience of companies in the face of the volatility experienced in recent days in energy prices, as well as supply chain disruptions. Specifically, it is aimed at sectors such as:
- Agriculture
- Land transport
- Short-sea shipping
- Energy-intensive industry
These sectors are especially vulnerable to the increase in energy costs and logistical disruptions, which justifies their priority inclusion in the aid program.
How compensations will work
In the case of agriculture, fisheries and transport, the Commission will grant permission to Member States to grant aid under two main modalities: compensation for additional costs and a simplified option for small businesses.
Through this mechanism, States will be able to cover up to 70% of the additional costs derived from the increase in fuel or fertilizer prices. To calculate this additional cost, Brussels proposes subtracting a historical reference price from the current market price and multiplying the result by actual consumption or pre-crisis consumption.
Furthermore, with the aim of reducing the administrative burden, it will be possible to grant aid based on general estimates or indicators, such as fleet size or cultivated area, instead of requiring detailed consumption evidence. This simplified option establishes a maximum limit of 50,000 euros per company, which will facilitate access to aid for small and medium-sized enterprises, traditionally more affected by administrative costs.
Regarding the electro-intensive industry, the proposal introduces temporary modifications to the framework of state aid linked to the Clean Industrial Pact. The objective is to respond to the peak in electricity prices through an increase in the intensity of aid. Specifically, the coverage of electricity costs for eligible consumption is raised from 50% to 70%, which can cover up to 50% of the beneficiary's total consumption. All this without requiring additional decarbonization efforts beyond those already foreseen to access this increase.
Subsidies for gas: an option under strict conditions
The Commission also leaves open the possibility of evaluating, on a case-by-case basis, transitional measures aimed at subsidizing the cost of gas used in electricity generation, with the aim of reducing prices for all consumers.
However, these measures must meet strict conditions: be limited in time, preserve incentives for investment in clean energy, and ensure that the benefit is fully passed on to final consumers.
Although the priority remains to advance towards a clean economy in the long term, the Commission recognizes that the new framework allows Member States to act immediately to prevent the growth of the most exposed companies from being irreparably harmed by the current situation. This balance between urgent response and structural strategy defines European energy policy at a time marked by geopolitical uncertainty.
Financial stability
In this context, the Spanish Government has conveyed to the Twenty-Seven the possibility of extending the disbursement of recovery funds for one more year, in order to reinforce the commitment to electrification and renewable energies. A proposal that sought to consolidate investments in energy infrastructures at a time when security of supply has become a priority.
Faced with this initiative, the President of the Commission, Ursula von der Leyen, responded by encouraging Member States to continue allocating massive resources to key projects for the green transition. However, she avoided commenting on a possible extension of the period for these funds, which is scheduled to end in August of this year. Her stance reflects Brussels' caution when it comes to modifying financial calendars, as well as the intention to maintain budgetary discipline in a context of high uncertainty.
From the Schuman roundabout area, the institutional heart of Brussels, the need to promote large-scale investments in energy storage, batteries, and electricity system flexibility is being emphasized. This latter concept refers to the ability to adapt energy supply and demand in real-time, relying on technologies such as artificial intelligence, capable of directing energy flows where they are needed and determining the most efficient "energy mix" at any given time. "This requires a lot of investment," they stress from the Commission, which considers these infrastructures essential to guarantee the long-term stability of the European energy system.