Dublin will end up having to build and police a border if it keeps "overplaying its hand" and no Brexit deal is reached, Jim Allister has warned.
The TUV leader last night advised the Irish Government and the EU to remember that they would be "the biggest losers" if there was no agreement between London and Brussels.
Mr Allister was speaking as European Council president Donald Tusk said the UK's offer on Brexit must be acceptable to the Republic before the talks can progress to trade issues.
Although the EU summit on whether negotiations should progress to the second phase isn't until December 14, both sides expect the next 48 hours to be crucial.
After meeting the Taoiseach in Dublin yesterday, Mr Tusk said: "Let me say very clearly: if the UK offer is unacceptable for Ireland it will also be unacceptable for the EU.
"I realise that for some British politicians this may be hard to understand, but such is the logic behind the fact that Ireland is an EU member while the UK is leaving. This is why the key to the UK's future lies in some ways in Dublin, at least as long as Brexit negotiations continue."
The Taoiseach warned that London must offer credible, concrete and workable solutions guaranteeing no hard border.
"I am also prepared to stand firm with our partners if needs be if the UK offer falls short on any of those key issues, including the Irish ones," he said.
But Mr Allister hit back: "Mr Tusk and Mr Varadkar need to be very careful as to where they manoeuvre themselves. If they overplay their hand and there is no deal, the Republic will be the biggest loser, with the EU not far behind.
"The trade deficit of both in respect of the UK means both need a deal more than we in the UK do. If there is no deal, World Trade Organisation rules apply and under EU treaties, Mr Varadkar will have to start constructing the border he says he doesn't want.
"He will also have to police it too, because he is responsible for collecting EU tariffs on imports. So the very people ranting about no border could end up providing it. What an irony that would be."
Professor Jon Tonge of Liverpool University said the DUP had every reason to be confident that Mrs May would not concede to demands for Northern Ireland to be granted special status.
"The British Government would like an all-Ireland custom union but the reality is that they can't sell that to the DUP because they need the votes of those 10 MPs in the Commons," he said.
"I don't believe the DUP are bluffing about collapsing the government if Northern Ireland is treated differently to the rest of the UK. The DUP holds most of the aces.
"It may not want a Corbyn government, but a Westminster election wouldn't harm the party in Northern Ireland. The DUP wouldn't lose any seats. The same isn't true for the Tories in Britain. An election could mean they were out of power for a generation."
Mr Tonge said Downing Street should be pushing for a "UK-Ireland customs union" which would be sellable to the DUP.
"Amidst concerns about the border, it makes sense although other EU members would likely object as they would believe the UK Government was getting off far too lightly with such a deal," he said.
Sinn Fein yesterday called on Dublin to use its veto on the Brexit talks if necessary. The party's Northern leader Michelle O'Neill said special status was "the obvious solution" to problems caused by Brexit.
"The Dublin government has maximum leverage as we approach the critical European Council summit in two weeks' time. The Taoiseach has the power to veto the negotiations from moving to the next stage.
"If there is any attempt by the Tories to prioritise the DUP's ideologically-driven position over the needs of the people here, then the Taoiseach should use that veto," she said.
But UUP leader Robin Swann said it should be the Republic seeking special status. "That is the sensible way to ease round many potential difficulties," he added.
Mrs May will travel to Brussels on Monday for talks with European Commission president Jean-Claude Juncker in the hope of securing a declaration that "sufficient progress" has been made on divorce issues like the financial settlement and the Irish border.
Mr Varadkar is expected to hold a special cabinet meeting to discuss the situation on Monday. "It is an important and impressive display of EU unity and solidarity - the EU is a family and we stick together," he said.
As Brexit talks enter a critical phase, taskforces from the EU and UK will be working all weekend ahead of Monday’s crucial meeting between Prime Minister Theresa May and President of the European Commission, Jean-Claude Juncker.
Monday’s lunch is the next milestone event in the Brexit negotiations.
Mrs May will present the UK’s offer on all key areas, including the rights of EU citizens after Brexit, the financial settlement, and practical language committing the UK to avoiding a hard Border with the Republic of Ireland.
These issues have to be settled in order for talks to reach “sufficient progress” before sides move to phase two, which will in theory involve a trade deal.
Mrs May is expected to put solid proposals on the table indicating the UK is heading in the right direction. Her presentation will be put to the rest of the EU member states.
Mr Juncker will also discuss them with the EU’s lead negotiator Michel Barnier. If there is sufficient progress this will be signed off by Mr Barnier, who will prepare to bring the UK’s offer to the European Council.
In the meantime, senior expert officials or ‘sherpas’ from each member state will meet in Brussels around Monday or Tuesday ahead of the crucial European Council summit on December 14 and 15.
In between will also be a meeting of the General Affairs Council for Article 50, where European ministers will also discuss the proposals.