The conflict in Ukraine is now part of a much bigger crisis between Russia and the West, MI6's former head has said.
Sir John Sawers warned the crisis was no longer about just Ukraine, saying it was "much bigger and more dangerous".
Any attempt by Western countries to arm Ukraine could lead to an escalation on the ground and even cyber attacks by Russia against the West, he warned.
Fighting between Ukrainian forces and pro-Russian rebels has continued, more than a day after a ceasefire was due.
Sanctions have already been imposed on Russia, and EU leaders have threatened Moscow with further measures if the planned ceasefire is not respected.
US President Barack Obama has said the US is studying the option of supplying lethal defensive arms to Ukraine - if diplomacy fails to end the crisis in the east of the country.
'Thousands of deaths'
However, giving a speech at King's College London, Sir John, who left MI6 in November, warned any attempt by the West to arm the Ukrainian government could lead to an escalation of tensions with Russia.
"Sanctions on Russia are imposing costs. But the Ukraine crisis is no longer just about Ukraine. It's now a much bigger, more dangerous crisis, between Russia and Western countries, about values and order in Europe," he said.
Western countries could "take on Moscow" by providing weapons to Ukraine so it can defend itself and introducing more stringent sanctions, he said.
But Sir John warned Russian President Vladimir Putin was likely to respond.
"As long as Mr Putin sees the issue in terms of Russia's own security he will be prepared to go further than us. So he would respond with further escalation on the ground. Perhaps cyber attacks against us.
"We have thousands of deaths in Ukraine. We could start to get tens of thousands, then what?"
The crisis might end up with a "new debilitating frozen conflict in Ukraine, for well into the future," he warned.
"That is a wretched outcome for Ukrainians. But it may be the least bad attainable outcome."
Sir John, who also served as ambassador to the UN and as a foreign policy adviser to former Prime Minister Tony Blair, said that recent interventions in Afghanistan and Iraq had proved costly to the UK.
"In the wake of Iraq and Afghanistan, Britain is pulling back from international intervention, just as America pulled back after the Vietnam war," he said.
But he warned that not intervening in Syria, and not sending ground troops into Libya, had resulted in "growing chaos" which has been "exploited by fanatics".
"Yes, intervening has huge risks and costs," he said. "Not intervening also has huge risks and costs.
"Afghanistan and Iraq? Or Syria and Libya? Which outcome is worse? Perhaps it's too early to say. We need to have that debate."
Sir John also warned that the UK's intelligence services were "weaker", following revelations by Edward Snowden, the former US spy agency contractor who disclosed the extent of surveillance and electronic monitoring by US and British government agencies.
"All of us, you and me here tonight, are more at risk from terrorism and cyber attack," he warned.
"Why? Mainly because technology companies have scaled back previous quiet cooperation with intelligence agencies."
Last month, Sir John said trust between governments and technology companies had been "shattered" by the Snowden revelations.