Washington is crafting financial sanctions together with European allies that could target Russian "individuals or companies" and "could involve export controls", US Treasury Secretary Janet Yellen says.

Ukrainian border guards patrol an area near the frontier with Russia in the Chernihiv region, as the West dismisses reports of Moscow's troop withdrawal.
Ukrainian border guards patrol an area near the frontier with Russia in the Chernihiv region, as the West dismisses reports of Moscow's troop withdrawal. (Reuters)

US Treasury Secretary Janet Yellen has warned of "some global fallout" if the West moves ahead with coordinated sanctions against Russia in the event of an invasion of Ukraine.

If the penalties are imposed, "of course, we want the largest cost to fall on Russia", Yellen said in an interview on Wednesday. "But we recognise that there will be some global fallout from sanctions," she told AFP news agency.

Her comments echoed President Joe Biden's warning on Tuesday that an escalation of the conflict would not be "painless" for Americans.

The president "has made clear that we intend to impose very significant costs on Russia if they invade Ukraine", Yellen said.

Treasury is crafting a set of financial sanctions together with European allies that could target Russian "individuals or companies" and "certainly could involve export controls", she said.

Yellen described them as a "very substantial package of sanctions that will have severe consequences for the Russian economy".

READ MORE: West seeks concrete Russian withdrawal as Ukraine celebrates 'Unity Day'

Energy markets in focus

She also acknowledged worries about the "potential impacts on energy markets, given the importance of Russia's role as a supplier of oil to the world market and of natural gas to Europe".

Washington is "working with our European allies to try to, as best as possible, shield them from undue impact" by ensuring supplies that come from other parts of the world are available, Yellen said.

Efforts are underway to "try to make sure that oil and natural gas continue to flow to Europe", she added.

With Russian troops massed on the border with Ukraine, Biden is working with allies on a diplomatic solution to the crisis. But he has also repeatedly warned Moscow of the dire consequences it will face if it moves against its neighbour.

Biden and German Chancellor Olaf Scholz urged Moscow on Wednesday to take real steps to defuse tensions.

The United States has dismissed reports that Russia was withdrawing troops from Ukraine's border, instead accusing Moscow of sending more soldiers as fears of an invasion grow.

Meanwhile, European Union officials said on Wednesday they have secured alternate sources of natural gas and could survive a supply squeeze by Russia.

Amid the prospects of an armed conflict and fears of Russia cutting off energy supplies, oil prices have risen sharply in recent weeks, hitting $96 a barrel on Wednesday — the highest level since 2014.

Natural gas prices have been more volatile, but also increased in the past week after dipping earlier in the month.

READ MORE: 'On the safe side': EU ready to deal with partial hit to Russian gas flows

Source: TRTWorld and agencies