The drums of war are beating louder in Europe as the West is accusing Russia of amassing more than 100,000 soldiers on the Ukrainian border and has threatened unprecedented sanctions if Moscow invades the former Soviet republic.

Although Russia denies any plans to invade, it has demanded security guarantees, which have been ignored by the West.

As Moscow sees “little ground for optimism” in resolving the crisis after the US rejected Russia’s main demands and US President Joe Biden insists there is a “distinct possibility” Russia might invade Ukraine in February, the world is poised to the consequences of what seems to be a long and devastating conflict.

The potential invasion of Ukraine would have severe consequences that would be felt across the world markets and most importantly could put world energy security at stake.

The Ukraine Standoff

Russia has lately spent much time and effort to protect its own sphere of influence, where it sent troops to help the Russia-allied government in Kazakhstan to quell violent protests that saw the government lose control in the country’s biggest city, Almaty.

Russia also stood by Belarusian President Alexander Lukashenko in the wake of massive protests against his re-election in 2020 that were violently crushed.

In most cases, Russia is pushed by its fears that the former Soviet republics may drift towards the influence of the Western alliance, known as the North Atlantic Treaty Organization (NATO).

It was also the same story with Ukraine. The two neighbors remained aligned after the breakup of the Soviet Union in 1991, but began drifting apart in the 2000s as Kyiv sought deeper integration with Europe.

After months of deadly protests in 2014, Ukraine’s pro-Russian government was toppled, which culminated in Moscow’s annexation of Ukraine’s Crimean Peninsula and its support for the separatist insurgency in eastern Ukraine, a war that has rumbled on ever since despite a series of shaky ceasefires, costing thousands of lives.

The current standoff centers on Moscow’s demands from NATO to deny membership to Ukraine and other ex-Soviet countries and to roll back on its military deployments in Central and Eastern Europe. The demands, which have been largely rejected by Washington and the military alliance, would significantly redraw Europe’s security landscape. NATO Secretary-General Jens Stoltenberg stressed that Western allies stood united in their warning to Moscow that an attack on Ukraine will provoke a severe response.

Biden has recently said that he will move US troops to NATO allies in Eastern Europe in the “near term,” marking a new phase in the US response to Russia’s escalation on the Ukrainian border.

As many as 8,500 US troops have already been placed on heightened alert to prepare to deploy to Eastern Europe — including units with “medical support, aviation support, logistical support” and “combat formation,” according to a Pentagon spokesman.

Washington has also called on all its allies to come up with economic sanctions to punish Russia if it goes ahead with the invasion. The European Union has already threatened “massive” sanctions and U.S. Senate Democrats have unveiled a bill to potentially punish Russian officials, military leaders, and banking institutions.

The US and UK have threatened to include personal measures targeting Russia President Vladimir Putin himself if Russia attacks Ukraine.

Western powers also think of cutting Russia out of the SWIFT financial system, which would hinder Russia’s ability to send and receive money from abroad through SWIFT, which moves money from bank to bank.

Another step that could damage Russia’s economy is the US plan to obstruct Russia’s access to US dollars – the global reserve currency that dominates international transactions.

The Energy Dilemma 

German Chancellor Olaf Scholz had also hinted at including Nord Stream 2 in a potential sanctions package, stating that Germany would discuss halting the pipeline as part of “severe economic costs”.

The $11bn pipeline is currently awaiting approval from Germany and the E.U. On several occasions, Putin had hinted that could help quickly reduce soaring European energy prices. However, Nord Stream 2 critics warn that it will increase Russia’s leverage over Europe and deprive Ukraine of transit revenues.

Still, energy supplies from Russia to Europe stand as one of Russia’s points of strength which makes it difficult for western allies to reach a consensus over the proposed sanctions.

In the meantime, Scholz has urged Europe and the US to think carefully when considering sanctions against Russia, stressing that “we have to consider the consequences this will have for us.”

The escalating tension between Russia and the West has heightened concerns about the future of Russian gas flows to the EU, which pushed the US to look at ways to secure energy for its European allies in case Moscow slashes its oil and gas exports.

Media reports indicated that the US is engaged in discussions with major natural gas producers around the globe, to understand their ability to temporarily surge natural gas supply and to allocate these volumes to European buyers.

Finding a Way Out

However, experts warn that Russia, the world’s third-largest producer of oil and the second-largest producer of natural gas, can create a big hole in supplies to Europe which will be difficult to compensate. Russia supplies about one-third of European natural gas consumption and more than one-quarter of its crude oil imports to become the bloc’s largest single energy source.

Experts also warn Ukraine standoff can pose a major risk for the world oil market, which is already trading at a seven-year high due to strong demand which is faced off with supply troubles and waning inventories. Any disruption in oil and gas supplies could have devastating consequences on energy consumers around the globe.

As the war frenzy expands, Ukrainian President Volodymyr Zelenskyy urges the West not to panic and warned that the way the West and the media were playing up its conflict with Russia would “cost Ukrainians dearly”. He even accused Biden of making a “mistake” with his strong rhetoric. There are also experts who think that the markets’ reaction to the threat of the invasion suggests it may be too much for Russia’s economy to bear the consequences of such a move.