The Taoiseach has said that sanctioning Aughinish Alumina, the Limerick-based refinery owned by a Russian company, would damage Ireland and the EU more than Russia.
Micheál Martin was speaking following reports that the company warned the Government that any attempt to sanction its sale of alumina to Moscow would have implications for Ireland's national gas and electricity grids.
Aughinish Alumina is at the centre of a controversy over its raw material allegedly ending up in Russian weapons.
Speaking at the Bloom festival in Dublin, the Taoiseach said that the sanctions would be "worse on the European Union", as it would have an impact on the plants in Sweden and France.
He said this would lead to a "very strong inflationary outcome".
Aughinish Alumina is a key part of a European Union supply chain, Mr Martin said, and added that sanctions on the firm would have an impact on the Irish economy.
"It would have an impact if there were sanctions on Aughinish, in terms of the employment there, so we are looking at about close to 1,000 direct employment in terms of both contractors and 470 odd more who are working there, but also, of course, the downstream impact," he said at the Bloom festival in Dublin," he said.
"Aughinish has been part of a wider European supply chain issue. In other words, it supplies product to Dunkirk in France and to Sweden, and so it is designated as a critical raw material.
"The whole principle of sanctions is we don't damage ourselves more than Russia, or that they don't become self-defeating, and it would appear to me now, Aughinish falls into that category."
The Taoiseach also said that current sanctions are putting pressure on Russia and its economy.
Ireland cannot 'cherrypick' companies over sanctions - Harris
Tánaiste and Minister for Finance, Simon Harris, has said that Ireland cannot cherrypick the companies where sanctions are imposed over Russia's war in Ukraine on the basis of what those sanctions would cost Ireland.
He said that he noted assurances from Aughinish Alumina that aluminium produced at the Co Limerick plant is not being used to produce weapons for Russia's war in Ukraine.
However, he said that the Department of Enterprise is conducting its own independent investigation to verify that the company's assertions are correct.
"Ireland can't cherrypick and doesn't cherrypick when it comes to sanctions," Mr Harris said.
"The sanctions list is considered by the European Commission. What merits a sanction [and] what doesn't. The European Commission puts that forward to member states and then member states determine what to do next.
"I note the clear view of the company is that that is not the case, but I also believe in not just trusting, but also verifying. And I understand that's why the Department of Enterprise will obviously carry out its own investigation independent of the minister. And I think that's important they do that to establish facts.
"Of course, companies can give information. It's helpful when companies provide information to Government as to the factual position, but it's also important on an issue as serious as an attack on another European country and a illegal war that government also investigates this."
Watch: Ireland cannot 'cherrypick' companies over sanctions
Mr Harris said he hopes that further sanctions would be agreed by EU member states shortly.
The European Commission has decided not to propose sanctions at this time on Aughinish Alumina.
RTÉ News understands that during discussions between the European Commission and member states on the next round of sanctions against Russia, a number of capitals raised the question of whether either the company itself or the product should be subject to sanctions.
However, two well-placed sources have said that the European Commission has decided not to recommend sanctions at this stage.
The Tánaiste said: "The European Commission is the body that makes a decision as to what should and shouldn't be included, or at least recommends to the member states, what should and shouldn't be included in relation to sanctions.
"It obviously does that with all of the available information. But in addition to that, our Department of Enterprise is also carrying out an independent investigation in relation to this too."
Mr Harris said many countries had experienced negative impacts from sanctions themselves, but that was not a reason not to impose them.
"Many countries across the European Union have seen impacts from sanctions, but that's not a reason not to have a sanction.
"Very clear, if your activity is supporting Russia, in terms of its military operation, its brutal, illegal invasion of Ukraine, Ireland is against that. I believe sanctions should be imposed," he said.
Read: Aughinish Alumina warns sanctions would impact power grid
