Amid heightened tension, a Russian invasion of Ukraine could be imminent, according to the armed forces minister.
It comes after the UK and other NATO allies told their citizens to leave the country ahead of any further incursion by Russian President Vladimir Putin.
“My fear is [an invasion] is very imminent, that’s not to say it’s definitely going to happen,” James Heappey told Sky News. “This is a warning because minutes after Putin gives the order, missiles and bombs could be landing on Ukrainian cities.”
There are now around 130,000 troops on Ukraine’s border, with western leaders – including Boris Johnson – holding urgent diplomatic talks this week.
But in the event of western sanctions against Russia if an invasion happens, what could the implications be for the UK?
Will Russia retaliate to sanctions?
It is understood to be highly likely that Russia will retaliate to any sanctions imposed by the West if it invades Ukraine. “The short answer is absolutely it can and will retaliate, there is no doubt about it. Our actions will not go unpunished,” James Nixey, director of the Russia and Eurasia program at Chatham House, told i.
“That’s not an argument for doing nothing, that would be blackmailing. But we’d be neglectful if we did not take into account what the retaliation could be.”
However, any repercussions from Russia are unlikely to come in the form of sanctions – with Mr Nixey pointing out that “the West tends not to buy many Russian products”.
Instead, it is believed their response could be more likely to come in the form of cyber warfare.
Russia is western Europe’s biggest single supplier of gas, providing around 40 per cent of its needs.
The UK’s reliance is much smaller, at 3 per cent. But gas prices could still be affected in the event of conflict between Russia and Ukraine.
Russian President Vladimir Putin could use a gas cut-off as retaliation against Western sanctions and a means to cause disruption to France, Germany and other Nato allies.
Gas makes up around a third of the EU’s energy supply, with Russian gas accounting for almost half of it. Major disruption to that supply would have an impact on the already rising wholesale price of gas, potentially impacting consumers.
If Russia limits its supply of gas to Europe, wholesale energy prices could also climb even higher, leading to a further spike in household bills.
“We expect that if Russia invades Ukraine, and let’s say there was a sanctions regime that meant Russia limited gas to Europe, that would drive price rises and yes that would ultimately feed through to customers,” Jonathan Brearley, chief executive of energy regulator Ofgem , told MPs last week.
A number of energy companies have already gone bust due to pre-existing cost issues, with customers facing an increase of up to £700 a year from April. Experts expect the Russian tensions to add to the price pressure.
However, Mr Nixey believes this is an unlikely outcome, given that Europe and Russia are interdependent on each other when it comes to energy. “Russia needs revenues. Russia is doing quite well now, speaking economically. Its coffers and its reserves have been bloated by the rise in energy prices and the demand from the cold winter but if you start withholding the energy, you start withholding the income,” he said.
“Ultimately [cutting off gas supplies] would hasten the already drifting European energy market away from Russia.”
Concerns have been raised about potential Russian-sponsored cyber attacks on Nato allies’ infrastructure amid the growing crisis.
The UK’s financial regulator, the Financial Conduct Authority (FCA), has warned banks to strengthen and test their defenses against retaliatory attacks if an invasion leads to sanctions on Russia.
Meanwhile, the National Cyber Security Center (NCSC), has also updated its guidance to tell firms to “bolster their cybersecurity resilience in response to malicious cyber-incidents in and around Ukraine”.
There are concerns of a cyber threat by Russia against companies and government agencies within the US and EU as a consequence of the sanctions they have threatened against the country if it invades Ukraine.
Ukraine blamed Russia for a cyber attack on its government websites last month in which hackers left a message reading “be afraid and expect worse”.
While its cyber attacks are most likely to come in the form of cyber espionage or incursion, shutting down websites for short periods or lifting information, Mr Nixey raised concerns about possible “hybrid warfare”.
“We [could] see a further increase in cyber incursions into western critical infrastructure, which can have real world and physical, life threatening effects. If you change the traffic lights, if you cut off the supply to a hospital, then clearly you can begin to start causing some chaos.”
“Right now [that threat] is nonexistent. I doubt they have that capability and I think it’s not likely. But at the same time [if we’re worried about] Russia’s ability to cut deep-sea power cables with their submarines we’re definitely conscious of the possibility they could up the ante as far as cyber warfare is concerned.”
Amid mounting fears of an attack in Ukraine, global stock markets have already fallen while oil prices have been pushed up to a seven-year high.
The tensions in the region have already had an impact on the UK economy, with the FTSE 100 falling 2 per cent on Monday morning in response to the fuel price volatility.
The stock market is the engine of pensions and savings for many in the UK.
On a more day to day level, petrol prices have passed 148p a liter for the first time, the AA said. The geopolitical situation is a key driver of the hike.
“As a result, drivers in the UK could be in for an even worse ride as pump prices look certain to go up even more,” an RAC spokesperson said.
Russia is also a major supplier of specialist raw materials such as titanium and palladium, which could have a knock-on effect on stretched post-pandemic supply chains.
How could we hit back?
The UK has outlined an array of sanctions it would impose on Russia if it invades Ukraine. The new laws would allow the Government to impose tough penalties on those with close ties to the Kremlin.
It means the UK can now sanction not just those linked directly to the destabilization of Ukraine, but also entities and businesses affiliated with Russia’s government, as well as their owners, directors and trustees.
The UK – along with the US and other allies – could target the Russian financial system and look to spark a run on Russian banks as citizens seek to avoid having their money become frozen and inaccessible.
The US is also heavily opposed to Russia’s Nord Stream 2 pipeline, which would supply gas to Germany and other European countries. Targeting efforts by Russia to export its raw materials and develop sustainable partnerships with other countries could add to pressure on its economy.
In Mr Nixey’s view, sanctions are likely to “hurt” the country, but “their pain threshold is higher” than that of western countries when it comes to economic penalties.
He added: “The difference is, Russia has the ability to accept self-sacrifice in a country which is well used to plenty of suffering and where a third of people live below the poverty line in comparison to the West.”