UK 'on edge of economic collapse' over Russian sanctions, warns Tory MP

Russian President Vladimir Putin attends the launching ceremony of the Gazprom's Amur Gas Processing Plant, via a video conference, at the Novo-Ogaryovo state residence, outside Moscow, on June 9, 2021. (Photo by Sergei Ilyin / Sputnik / AFP) (Photo by SERGEI ILYIN/Sputnik/AFP via Getty Images)
A Conservative politician has warned the growing list of sanctions on Russia risks plunging the UK into "dystopian economic collapse". (Getty Images)

A Conservative politician has warned the UK faces economic collapse as a result of Western sanctions against Russia following its invasion of Ukraine.

Sir Alan Duncan - former deputy at the foreign office under Boris Johnson - warned that sanctions and a worsening economic relationship with Russia risks having a catastrophic impact on gas costs.

“There is this auction of indignation, which all of us totally understand, against anything to do with Russia," Sir Alan said. “So they ban this, ban that and ban everything, but in the end, we’re going to end up banning our own supplies.

He indicated Western countries should avoid any further significant punitive measures that would impact its ability to continue buying Russian gas.

"We, of course, want to disadvantage Russia as an essential tool of war. But we don’t want to disadvantage ourselves so that we fall into some kind of dystopian economic collapse. We are on the edge of that.

“Now, for instance, there are subsidiary companies of Gazprom, which are not sanctioned, which are not incorporated in Russia, which are incorporated in one case in the UK, which are essential to the smooth flowing of gas.”

natural gas
Natural gas exported from Russia, 2022 (US Energy Information Administration/Reuters)

While the UK only relies on Russia for around 3% of its gas, Russia accounts for up to 40% of Europe's – meaning any disruption to supply will have a major impact on the wholesale cost of gas and oil that Britain imports and thereby make it more expensive for consumers.

There are also fears Vladimir Putin could retaliate to harsh rhetoric or sanctions from the West by pushing up whole sale gas and oil prices or interfering with supplies.

Watch: Gas, oil and tech – how Russia's invasion will impact the UK

Read more: Three major changes that may affect your energy bills

In a sign Europe is trying to reduce its reliance on Russia for energy in response to the invasion of Ukraine, Germany halted the Nord Stream 2 gas pipe line in February.

Boris Johnson has previously cautioned against Europe's over-reliance on Moscow for its energy supplies. "What I think all European countries need to do now is get Nord Stream out of the bloodstream," he said in February.

"Yank out that that hypodermic drip feed of Russian hydrocarbons that is keeping so many European economies going.

“We need to find alternative sources of energy … and get ready to impose some very, very severe economic consequences on Russia.”

proportion of gas from russia
A small proportion of the UK's gas imports come from Russia. (Department for business, energy, and industrial strategy)

Read more: Ukraine crisis: Energy bills could soar by hundreds of pounds as gas prices spike after invasion

On Monday, MPs will fast-track the Economic Crime Bill through the Commons as part of the UK’s approach to sanctions levelled against Russia. It will enable the UK to tackle the swathes of Russian money thought to be in the UK, often buried in property.

“Punishing sanctions are meaningless until properly implemented, and these changes will allow us to pursue Putin’s allies in the UK with the full backing of the law, beyond doubt or legal challenge," said Johnson.

On Saturday, the Independent reported the UK this week could look at sanctions focused on the Russian energy sector, a significant part of the Russian economy.

Sir Alan's warnings about gas prices comes just weeks after Ofgem announced the energy price will rise by nearly £693 in April, up 54% – meaning the UK household's annual energy bill will rise to £1,971 on 1 April.

And modelling from independent energy market analysts Cornwall Insights on Wednesday warned that the UK's typical annual energy bill could soar to £2,497 in October when the energy price cap is reviewed. In February, Investec said last week annual energy costs in the UK could climb as high as £3,000.

BERLIN, GERMANY - FEBRUARY 27: A man with a sign saying
There are growing calls for the West to reduce its reliance on Russian gas. (Getty Images)

Fuel prices hit a record high again on Sunday, with figures from data firm Experian Catalist showing the average price of UK forecourts was 155.62p - up from 155.05p on Saturday. The average cost of a litre of diesel also reached a new high of 161.28p.

On Monday, the prime minister said a boycott of Russian oil and gas was “very much on the table”.

"I don’t think Tony Blinken [US secretary of state] was wrong in the sense that we are all together now moving very, very fast and seeing that something that, perhaps three or four weeks ago, we would never have considered is now very much on the table," Johnson said at a Downing Street press conference.

“We have to consider how we can all move away as fast as possible from dependence, reliance, on Russian hydrocarbons, Russian oil and gas.

“Everybody is doing that, everybody is on the same journey. Some countries will find it faster and easier than others, that’s all."

Over the weekend, US secretary of state Antony Blinken said Washington was in “very active discussions” with countries in Europe over banning imports of Russian oil.

However, in a sign of competing views on the issue, German chancellor Olaf Scholz rejected calls for sanctions on Russian gas and oil on Monday - claiming the imports were "essential" for the daily lives of Europeans.

Watch: Zelensky calls for new sanctions on Russia's oil exports