The document says: “UK should not support for now, trade sanctions … or close London’s financial centre to Russians.”

It also says that Britain should “discourage any discussions [eg at Nato] of emergency military preparations”.

Downing Street sources confirmed that the briefing document is official policy.

Foreign Secretary William Hague insisted Tuesday that Britain’s options in dealing with Russia over the Ukrainian crisis remained open.

Speaking in the House of Commons, Hague did not deny the content of the briefing paper. But he insisted that Britain’s options remained “very much open”.

Hague told lawmakers that allowing the document to be photographed was “absolutely regrettable and should not happen”.

Consequences and costs

But he rejected the claim by the opposition Labour party that the blunder risked compromising Britain’s influence in the diplomatic discussions over Ukraine.

“Anything that is written in one document being carried by one official is not necessarily any guide to the decisions that will be made by Her Majesty’s government. Our options remain very much open on this subject,” he said.

During a visit to Kiev on Monday, Hague warned Russia of the “consequences and costs” of intervention in the ex-Soviet state but he and Cameron have yet to spell out what these might be.

Ministers fear that imposing trade restrictions or somehow excluding Russians from the financial markets in London will hurt economic growth and deter foreign investment.

The capital is known as “Londongrad” due to the number of millionaire Russian oligarchs based here. A senior figure said: “We’re trying to find ways of hurting Russia, not hurting ourselves.”

Powell, who was at Eton with the Prime Minister, is the son of Margaret Thatcher’s chief foreign policy adviser Charles Powell and nephew of Tony Blair’s chief of staff Jonathan Powell.

The document undermined claims by Cameron and William Hague that the UK was set to get tough with Russia.

Visiting the Ukrainian capital Kiev, the Foreign Secretary described the situation as the biggest crisis in Europe in the 21st century.

He warned Russian president Vladimir Putin that he faces a “significant cost” for taking control of the Ukrainian region.

After chairing the National Security Council meeting, Cameron said a clear message needed to be “sent to the Russian government that continuing down this path of violating the sovereignty of another country will have costs and consequences”.

He added: “We shall have to bring to bear diplomatic, political, economic and other pressures.”

By contrast, US secretary of state John Kerry went much further, threatening to deny Russians in America access to their money. He said Putin “may find himself with asset freezes on Russian business. American business may pull back, there may be a further tumble of the rouble”.

Suspend cooperation

Last night EU foreign ministers, meeting in Brussels, agreed to suspend cooperation with Russia over the planned G8 summit in Putin’s holiday home of Sochi in June.

The EU will also suspend cooperation on visas and they warned that ‘further sanctions’ may be imposed after an emergency summit on Thursday. A Downing Street spokesman refused to discuss the leak. ‘We never comment on security matters,’ he said.

Labour MP Simon Danczuk called for Powell to resign, pointing out that Bob Quick — the former Scotland Yard head of counter-terrorism — was forced to quit in 2009 after a similar mistake.

He said: “It’s astonishing that the deputy national security adviser can’t keep sensitive documents like this private. It’s clearly a serious issue and needs to be addressed.”

Tory MP Douglas Carswell added: “I’m surprised to hear that Inspector Clouseau is working in Downing Street. We have literally shown all our cards.”

One Government official indicated that a reprimand was on the cards for Powell.