Poland to End Fuel Subsidies as US-Iran Peace Talks Heat Up

Poland is preparing to restore regular tax rates on fuels as peace talks between the US and Iran progress, Prime Minister Donald Tusk said at a press conference on Saturday.

The country reduced value added and excise tax on fuels starting in April, which allowed gasoline prices to stay one of the lowest levels across the European Union throughout the conflict.

The subsidies, which have been scheduled to run until the end of June, were estimated to cost 1.6 billion zloty ($436 million) a month. On Friday, the Polish government said it would keep lower VAT rates on the fuels for the last two weeks of the month, while it wouldn’t extend a reduction in excise levy, signaling a gradual wind-down of the program.

The US said an interim peace deal that would reopen the Strait of Hormuz and end Iran’s nuclear weapons ambitions looks increasingly likely and could be signed within days. Tusk said that signals fuel prices could return to “normal levels.”

Read More: US Vows Interim Iran Deal Will Reopen Hormuz, End Nuclear Threat

“We’ve assumed that we would subsidize fuel prices until the summer so that they don’t shoot up,” Tusk said in a televised press conference in Lomza. “We kept that promise, which allowed us to have the lowest prices in Europe, but we’ll be ending this project now, in the summer.”

Poland is seeking to rein in its record budget deficit, driven by the state’s massive defense and social spending commitments. Tusk’s cabinet plans to raise additional 3.8 billion zloty from a windfall tax on oil companies designed to compensate for the fuel subsidies program.