EU attempts to outmaneuver Iran rollercoaster with emergency energy plan

BRUSSELS — The European Commission will present a sweeping emergency energy package on Wednesday, as it attempts to fend off a looming energy crisis.

If only it knew what problem it was trying to fix.

Since the Iran war broke out on Feb. 28, the EU has swung between wildly divergent policy impulses as the chaos in the Persian Gulf progresses at breakneck pace. It began with anxieties around high prices that were already simmering before the war. That morphed into concerns around Europe’s gas supplies, before the bloc’s dwindling jet fuel stocks and jitters over refinery capacity took center stage. 

Dangling above it is the war itself, as Donald Trump’s shifting objectives and erratic diplomacy do little to secure the Strait of Hormuz, the crucial waterway at the center of the energy woes. 

Draft documents obtained by POLITICO show that the EU’s raft of measures on Wednesday will attempt to deal with these fast-moving targets simultaneously — within the bounds of reality.

Primarily, the EU is either advising countries to use existing laws or is introducing subtle, temporary changes to make those rules more effective. Proposed changes to subsidies rules will allow countries to cover up to 70 percent of the cost of wholesale power bills until December, and up to 50 percent of the extra fuel costs caused by the crisis for some sectors. The Commission will also work with countries to develop targeted tax cuts to bring down energy bills.

But a good portion of the EU’s response remains, necessarily, either long-termist or fully improvised, reflecting both the fast-changing reality and the difficulty of dislodging decades of fossil fuel dependence.

Some measures are simply a continuation of the EU’s ambitious, years-old climate agenda, including commitments to speed up the decarbonization of Europe’s grids, mobilize green investment, and encourage increased adoption of green home appliances. Others appear to have been designed on the fly to address a situation that remains impossible to track, with measures to increase member country coordination, reduce demand, and boost information sharing to better understand the problem.

But the energy troubles continue to be so broad, multifaceted and fast-changing that observers doubt that whatever the EU comes out with on Wednesday can satisfy capitals gearing up for potentially years of turbulence. Expanding subsidies, for instance, “may give some comfort to some but is unlikely to make a dent,” complained one national official.

The painful reality is that a truly effective response requires time — and money — that many countries simply don’t have.

“Not every country dependent on fossil fuels can quickly turn to electricity but this is the only solution,” Žygimantas Vaičiūnas, Lithuania’s energy minister, told POLITICO. “Nobody can forecast the future for global markets — sometimes we are hostages of the situation.”

How did we get here?

When the war started, talk of an EU-wide policy response was seen as premature if not outright irresponsible. EU officials and energy ministers signaled optimism for the first two weeks, pointing to the bloc’s diversified supply and the growth of renewables as evidence this crisis wouldn’t be as bad as the one that followed Russia’s invasion of Ukraine in 2022.

A commercial vessel off the coast of Dubai on April 20, 2026. Oil prices jumped sharply on April 20 over fears hostilities could resume in the weeks-long war, after Iran closed the Strait of Hormuz again over the weekend following its brief reopening on Friday in recognition of a ceasefire in Lebanon. (Photo by AFP via Getty Images) /

In meeting after meeting, officials said supply was secure and that the main risk was rising prices. Instead of rolling out concrete measures, the European Commission — the EU’s executive — was content to remind countries of the limited tools already available under EU laws such as tax cuts and subsidies, while urging them to hasten efforts already underway to decarbonize and electrify their economies.

If anything, the message was one of vindication — the green transition and sweeping diversification efforts set into motion years ago were the correct course, and the EU just had to go further. But as the war progressed, that position became harder to defend.

The early confidence was rooted in the EU’s limited exposure to the Strait of Hormuz. Even though the waterway accounts for around 20 percent of global oil and liquefied natural gas supplies, the EU’s imports from the region are comparatively small. Most come from the U.S., Canada and Norway, as well as Azerbaijan and Algeria.

But a pressing supply issue soon emerged nevertheless: the EU’s reliance on natural gas.

The EU bought only a small amount of its natural gas from the Gulf, but the growing uptake of liquefied natural gas — the seaborne, supercooled gas that the bloc switched to as it sought to wean itself off the piped Russian variety — presented a new problem. Unlike pipes, LNG tankers are often free to pursue business wherever it’s most lucrative, meaning the closure of the strait threatened a fierce global competition for dwindling supplies, redirecting ships from Europe to Asia.

The event that seemed to crystallize the EU’s growing gas problem came with a quite literal bang in the middle of a summit of European leaders on March 19, when the bombardment of two huge natural gas fields in Qatar knocked out 3 percent of global supply in a matter of seconds. Several EU countries were exposed, including Italy and Belgium, which both faced significant loss of supply after the boss of Qatar’s top energy company declared force majeure on contracts with the countries, warning that it could take up to five years to rebuild production capacity.

The threat of a long disruption suddenly became very real. Officials were now aware that even if the war ended, the wrenching changes to global energy supply chains could last years, with permanent effects on prices. And it only added to fears over the EU’s unusually low gas reserves, depleted following sharp drawdowns over the winter.

The same day as the leaders summit, the EU began to tease out a more concrete set of policies to respond to the turmoil, with hints of “targeted and temporary” changes to subsidies rules, the EU’s carbon market and even — softly, softly — a windfall tax on energy companies. It also called on countries to soften demanding gas storage targets to avoid panic buying and further price spikes. But countries were already starting to take matters into their own hands, with Italy’s Giorgia Meloni, for instance, visiting Algeria and Saudi Arabia to shore up new supplies.

Pointedly, however, the Commission also resisted calls for structural changes to the EU’s green agenda, in the face of a concerted attack by a cohort of fossil-fuel-dependent countries.

Dive-bombing into the discourse

But even as the gas situation looked to be improving, a bigger problem began to overshadow it. The bloc’s supply of jet fuel and diesel — unlike gasoline, crude oil and natural gas — drew heavily from the Gulf, with around 40 percent of EU supplies transiting Strait of Hormuz.

Since late March, that worry has dominated policy discussions. It began with the EU urging governments to get citizens to travel less to conserve fuel, and has since blossomed into talk of mandatory fuel sharing, warnings against hoarding fuel, and — per the latest draft — gentle encouragement for Europeans to take up “eco-driving” lessons as a possible voluntary measure.

But even with the 400 million barrels of oil released by a group of wealthy countries under the auspices of the International Energy Agency in March, analysts warn that the continent has only six weeks left of jet fuel supplies. Some member countries, meanwhile, are quietly worried about cuts to domestic production of refined fuel, compounding the bloc’s dependence on foreign imports.

Qatar Energy’s facilities in Mesaieed Industrial City, south of Doha. The company declared force majeure on contracts with Italy and Belgium after Iranian attacks on natural gas fields in March. | Getty Images

The pace of the proliferation of new concerns appears to have undermined the Commission’s ability to formulate an effective response that’s well-suited to all members and doesn’t blow up the single market. In the draft of the sweeping proposals set to be announced Wednesday, key sections on jet fuel are yet to be filled in among the more-fleshed-out proposals on state aid and tax cuts.

The Commission’s response has also been contradictory, with officials denying there’s a fuel crisis even as airports warn of flight cancellations and the EU executive itself pushes Europeans to cut transport use.

Evidently, one issue is just how limited the EU’s understanding of its own energy mix is: The proposals expected on Wednesday include measures to increase the mapping of jet fuel dependencies and European refining capacity.

Coordination is also an issue. While groups are regularly convened to discuss supply issues, most real coordination takes place bilaterally between the Commission and countries, according to two energy officials involved in such discussions. It’s no surprise one energy minister in a meeting earlier this month went so far as to call for a WhatsApp group to share information about supplies, and that the EU is looking into reviving a controversial effort to coordinate gas purchases.

Earlier this week, the Netherlands went out on its own, launching emergency measures and announcing an additional release of oil stocks — bypassing the EU’s own glacial effort to coordinate the release.

The draft of Wednesday’s proposals still broadly hews to the line set out by the EU executive as the war got going, focusing on providing better incentives for the green transition, including reduced grid tariffs and murky commitments to mobilize green funding.

But these provisions have proved controversial, too, with some countries, especially in the rich North, arguing that expanding subsidies risks distorting the EU’s single market and undermining years of careful green investment planning. Others warn they don’t go far enough, leaving national capitals to handle the bulk of the response.

Vaičiūnas, the Lithuanian energy minister, applauded the EU’s decision to encourage countries to unleash new funds for the green transition, but expressed concern that smaller countries — and some debt-burdened bigger ones — would be unable to generate the financial firepower to make the most of relaxed rules.

“In principle, these exemptions make more freedom for member states, but the financial burden is on their shoulders,” he said, calling for EU-wide financial instruments, such as common debt, to supplement the regulatory changes and help countries finance heat pumps, batteries and electric vehicles.

To Vaičiūnas, finishing off Europe’s fossil fuel dependency is the only durable solution to the energy madness prompted by the U.S.-Israeli attack on Iran — and there’s no quick fix for that.