EU loosens aid rules to target firms worst hit by Ukraine war  

Sanctions against Russia 'will take a toll on the European economy', European Commission vice president Margrethe Vestager has warned. Picture: AP

EU companies affected by sanctions imposed on Russia can get up to €400,000 in state support as well as compensation up to 30% of energy costs under looser EU state aid rules, the European Commission has said. 

From airlines to carmakers to tourism businesses, thousands of companies across the 27-country bloc have reported severe disruption due to the sanctions.

Companies in the agriculture, fisheries, and aquaculture sectors can get up to €35,000, while businesses facing a liquidity crunch can get state guarantees on loans as well as subsidised loans.

The Commission did not specify which sectors would qualify for the larger support.

Companies facing soaring energy costs can get state aid up to 30% of costs, capped at €2m, the Commission said.

This measure will benefit manufacturers of aluminium and other metals, glass fibres, pulp, fertiliser, hydrogen, and other basic chemicals.

"These sanctions also take a toll on the European economy and will continue to do so in the coming months," Commission vice-president Margrethe Vestager said in a statement. 

We need to mitigate the economic impact of this war and to support severely impacted companies and sectors."

Sanctioned Russian-controlled entities are not eligible for such aid. 

The Commission, which also acts as the EU's competition enforcer, relaxed its state aid rules two years ago, allowing governments to pump trillions of euros into companies hit by the Covid-19 pandemic. 

The EU plans to distribute €500m to help farmers and allow them to grow crops on fallow land as part of measures to mitigate food price spikes and potential shortages resulting from the conflict in Ukraine.

The Commission's proposals also include assistance to Ukraine to help its farmers sow corn and sunflower seeds and tend to wheat.

Ukraine is a top global player in sunflower oil, with over 50% of world trade, and holds significant shares for wheat, barley, and maize, which has already led to surges in prices and concerns about shortages.

The EU executive stressed that there was no immediate threat to EU food security, given the EU is a net exporter of cereals. However, recognising farmers will face higher fuel and feed prices, the EU will distribute €500m to the 27 EU member states to aid farmers hardest hit by the crisis.

Reuters