  Following the oil-price surge in the wake of Russia's invasion of Ukraine,
many countries in the EU are cutting taxes on petrol and diesel. Using standard
theory and empirical estimates, we assess how such tax cuts influence the oil
income in Russia. We find that a tax cut of 20 euro cents per liter increase
Russia's oil profits by around 11 million Euros per day in the short run and
long run. This is equivalent to 4100 million Euros in a year, 0.3% of Russia's
GDP or 7% of its military spending. We show that a cash transfer to EU
citizens, with an equivalent fiscal burden as the tax cut, reduces these side
effects to a fraction.
