Sinking the ships and then denying knowing anything about it would probably be the best course of action. That's what Russians would do, if the roles were reversed.

Unfortunately too many Western leaders still think that it's possible to negotiate in good faith with Russians. In reality they respect only force, and see European rules based order and "fair play" as weakness. If Baltic states didn't belong to NATO and Finland didn't have such a big army, Russians would be already doing a lot worse things than cutting cables.

Over here in Finland, even during the "good" years between collapse of the Soviet Union and invasion of Crimea, Russian businessmen kept buying property that made absolutely no economic sense, but was located next to critical infrastructure. Better relations between West and Russia were largely an illusion, especially since Putin took over.