Yellen acknowledges 'some global fallout' from any Russia sanctions
US Treasury Secretary Janet Yellen (AFP)

US Treasury Secretary Janet Yellen says "some global fallout" would result if the West moves ahead with the punishing, coordinated sanctions threatened against Russia, should it attack Ukraine.

If the penalties are imposed, "of course, we want the largest cost to fall on Russia," Yellen said in an interview.

"But we recognize that there will be some global fallout from sanctions," she told AFP.

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

With Russian troops massed on the border with Ukraine, Biden continues to work with US allies on a diplomatic solution to the crisis, but has repeatedly warned Moscow of the dire consequences it will face if it moves against its neighbor.

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

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."

But she 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 that "supplies that are available, that come from other parts of the world" and to "try to make sure that oil and natural gas continue to flow to Europe."

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

Amid the prospects of armed conflict, and threats Russia could cut 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.