Commission state aid due to war situation in Ukraine

The current war situation in Ukraine, the sanctions imposed by the EU and international partners against Russia and Belarus, and the counter measures taken by Russia will have economic repercussions on the entire internal market. Undertakings in the EU may be affected in multiple ways, both directly and indirectly. This may take the form of shrinking demand, interruption of existing contracts and projects, with the consequent loss of turn-over, disruptions in supply chains, in particular of raw materials and pre-products, or other inputs no longer being available or not being economically affordable.

The geopolitical crisis is having a particularly severe impact on the agriculture, food processing, fisheries, and aquaculture sectors. High energy prices feed into high fertilisers prices. Fertiliser supply is also impacted by the restriction on fertiliser imports from Russia and Belarus. The crisis is likely to have serious consequences on the supply of grain (maize and wheat) and oilseeds (sunflower, rapeseed) or starch-derivatives from Ukraine and Russia to the EU, leading to a strong increase in livestock feed prices. The combined impact of those cost increases in energy, fertiliser, grains, and oils is hardest felt by livestock farming. Ukraine is also an important producer and exporter of vegetable oils (sunflower in particular), therefore, price increases for those products are affecting operators in the food-processing sector and forcing them to seek for alternatives.

Another concern is the impossibility for EU products to continue to flow to Ukraine and potentially also to Russia and Belarus due to the war situation or sanctions. This would affect mainly the sectors of wines and spirits, processed foods (including processed fruits and vegetables), chocolate, confectionery, infant formula, and pet food in the case of Russia, fruits and vegetables in the case of Belarus, and most agricultural products in the case of Ukraine.

In the overall effort of Member States to address the challenges resulting from the geopolitical situation, this Communication sets out the possibilities that Member States have under EU State aid rules to ensure liquidity and access to finance for undertakings, especially SMEs that face economic challenges under the current crisis.

The Commission sets out the criteria for the compatibility assessment it will apply in principle to the aid granted by Member States under Article 107(3)(b) TFEU.

For more information, please see here.