Russian President Vladimir Putin warned over sanctions as withdrawal hopes raised

British foreign minister says oligarchs and companies associated with the Kremlin would be hit hard

Russian President Vladimir Putin and his aides have appeared to offer hope of a de-escalation. AP

Russian President Vladimir Putin has been warned an invasion of Ukraine would result in a “ratchet of sanctions” from Britain, as Foreign Secretary Liz Truss predicted enormous economic consequences for Moscow.

Ms Truss said the government would respond to such military action by drawing on its new sanctions regime to aim at Russian oligarchs and Kremlin-supporting companies who funnel money to London's money market. She said the sanctions would include asset freezes and visa bans for Mr Putin's backers and associates.

“There will be nowhere to hide for those oligarchs close to Putin, for companies that back the Russian state, and it will see a degradation of the Russian economy,” she told BBC Radio 4’s Today programme.

Last week Britain put in place new legislation enabling it to impose broader sanctions than it previously could on Russian individuals and entities determined to be destabilising Ukraine or supporting the Russian government.

The foreign secretary said the Conservative-led government was determined to get on with “clearing up” issues related to illicit finance in the capital, and admitted that sanctions in the past had not been tough enough.

“Of course, we need to continue to clear up illicit finance in London, of course we need tougher sanctions which is why I put in place tougher sanctions legislation,” she said.

Asked about the possibility of offering some concessions to Mr Putin to convince him to back away from any plans to invade, she ruled out any offers, saying there should not be any rewards for aggression.

Her comments came as Russia pulled some troops back from its border with Ukraine on Tuesday morning, hours before Mr Putin was due to meet German Chancellor Olaf Scholz for crisis talks in Moscow.

Prime Minister Boris Johnson led a meeting of the government’s Cobra emergency committee on Tuesday to discuss the crisis.

Speaking to Sky News after the Cobra meeting, Mr Johnson said there were “signs of a diplomatic opening” in the crisis, but warned Moscow was sending “mixed signals” to the West.

“We are seeing a Russian openness to conversations,” the prime minister said.

“On the other hand, the intelligence that we’re seeing today is still not encouraging.”

Mr Johnson referenced satellite images and intelligence which appear to show Russian field hospitals close to the border with Ukraine, as well as in Belarusian territory. Mr Johnson said the erection of medical sites “can only be construed as preparation for an invasion”. He also said the Russian leadership had sent more battalion tactical groups closer to the Ukrainian border, according to intelligence.

Summing it up, he said the Kremlin was sending “mixed signals” over its intentions which meant Britain had even more reason to “remain very tough and very united, and particularly on the economic sanctions”.

“The UK has been out in the lead for a while,” he added. “What we’re doing is targeting Russian banks, Russian companies and making sure that we take even more steps to unpeel the facade of Russian property holdings whether in London or elsewhere, unpeel the facade of Russian ownership of companies. And also take steps to stop Russian companies from raising capital on London financial markets. That is a very, very tough package of sanctions, it’s ready to go if Russia is so rash, so reckless as to invade Ukraine.”

Asked about US intelligence suggesting an invasion could happen as early as 1am on Wednesday, Mr Johnson said: “We think that they have a huge preparation ready to go at virtually any time.

“Everyone can see what the potential routes in are, down south from Belarus, encircling the Ukrainian army in the east, around the enclave in Donbas, or even coming up from the south, from the sea, taking Odessa, Kherson … there are a lot of options.”

The prime minister reiterated the UK’s desire to see Russian troops drawn back from the border with Ukraine, and for the military threat to be replaced by negotiations.

“We think there is an avenue for diplomacy,” he said.

While Western intelligence officials said Wednesday could mark the start of an invasion, comments from Mr Putin and his foreign and defence ministers seemed to offer hope of a de-escalation.

During a carefully choreographed meeting on Monday with Mr Putin, Russian Foreign Minister Sergey Lavrov said “there is always a chance” of reaching an agreement with the West over Ukraine. Russia has repeatedly denied it has plans to invade its neighbour.

However, Ms Truss said an invasion remains “highly likely” and issued a warning that the presence of Russian soldiers on Ukrainian soil would have devastating consequences for Europe’s stability, as she restated her support for Kiev to make its own security arrangements.

Referring to one of the Kremlin’s main demands for an assurance that Ukraine would never be allowed to join Nato, Ms Truss said only the Ukrainian leadership and military alliance could make such a decision — not Russia.

She said if Russia had its way, it would probably interfere in the security arrangements of neighbouring states.

“Russia should not have a veto over other countries’ security arrangements, and the big risk, of course, if there is an invasion into Ukraine, [is] that will be hugely damaging for Russia and Ukraine and it will further undermine the stability of Europe,” she told Sky News.

“President Putin has actively questioned why other countries in Eastern Europe are members of Nato as well, so this, I fear, would not stop at Ukraine. This is an attack on the neighbouring states of Russia and other East European countries in trying to undermine the legitimacy of them being part of Nato.”

As leaders on the continent brace for the possibility of Russian tanks rolling into Ukraine, diplomatic efforts aimed at avoiding the worst-case scenario have been stepped up.

Diplomacy has reached a crucial stage, as onlookers hold their breath after the Biden administration’s warning that an invasion had been planned for Wednesday.

Mr Scholz's trip to Moscow comes on the back of his visit to Kiev for crisis talks with President Volodymyr Zelenskiy on Monday.

Western leaders consider the Russian troop build-up on its border with Ukraine to be the worst threat to the continent's security since the Cold War, and have prepared a crippling package of economic sanctions in response to any attack on its neighbour.

He told Mr Putin that exchanges with leaders in European capitals and Washington showed enough of an opening for progress on Russia's goals to be worth pursuing.

Russia has amassed more than 130,000 troops on the Ukrainian border but Pentagon spokesman John Kirby said US defence officials still did not believe Moscow had made a final decision on whether to invade.

Alarm has also been fuelled by recent Russian military exercises, including with Belarus, where Washington said Moscow had sent 30,000 troops for more than a week of drills.

Before Tuesday's talks, German Foreign Minister Annalena Baerbock said “the situation is particularly dangerous and can escalate at any moment".

“The responsibility for de-escalation is clearly with Russia, and it is for Moscow to withdraw its troops,” she said. “We must use all opportunities for dialogue in order to reach a peaceful solution".

The Russian leader and his top aides have consistently argued that the current crisis is the result of the US and western Europe ignoring Moscow's legitimate security concerns.

Russia, which denies any plan to invade Ukraine, already controls Crimea, which it seized in 2014, and supports separatist forces controlling the Donbas region in the east of Ukraine.

“We know the Ukrainians would fight back,” Ms Truss said. “We have helped train up 20,000 soldiers, we have provided defensive weapons and the Ukrainians will engage in what will be a long, drawn-out conflict which will be hugely damaging for Russia and the people of Russia.”

Ms Truss declined to be specific when asked how soon Mr Putin could take control of Kiev if his troops crossed the border, only saying “very, very quickly”.

“In terms of the timing of an attack, it could be imminent,” she said.

Ms Truss travelled to Moscow last week for talks with Mr Lavrov. She was given a frosty reception, with Mr Lavrov characterising their meeting as a “conversation between deaf and dumb”, claiming that Ms Truss did not listen to Russia’s position and that the UK was unprepared for the talks.

On Monday, Ms Truss said “of course, the Russians didn’t like what I had to say” but stressed that she had to deliver a message to Mr Putin’s government.

On Friday, a day after Ms Truss’s visit, British Defence Secretary Ben Wallace touched down in the Russian capital for talks with Mr Putin’s defence chief, Sergei Shoigu. Their meeting proved equally unfruitful, with Mr Shoigu describing the level of co-operation between the two countries as “close to zero”.

On Monday, Mr Johnson spoke to US President Joe Biden about the crisis. They “agreed there remained a crucial window for diplomacy and for Russia to step back from its threats towards Ukraine”, a British government spokesman said.

“The leaders emphasised that any further incursion into Ukraine would result in a protracted crisis for Russia, with far-reaching damage for both Russia and the world.”

Reacting to the heightened security crisis, financial markets have been jittery but have not entered panic mode.

Stocks on Wall Street shed early gains and closed broadly lower on Monday as the US moved to close its embassy in Kiev.

The S&P 500 fell 0.4 per cent after having been down as much as 1.2 per cent shortly after the Biden administration said it was closing its embassy in Ukraine and moving all remaining staff there to a city near the Polish border.

Sergiy Tsivkach, executive director at UkraineInvest, which aims to attract and support foreign investment in the former Soviet nation, said despite the looming threat of an invasion he and his colleagues have seen “strong interest from investors”.

“Ukraine is very well prepared, Ukraine is not stressed at all,” he told Sky News.

He also said life in Kiev was continuing as normal for the majority of the 2.8 million who call the city home.