US President Joe Biden and Russian President Vladimir Putin held two hours of virtual talks on Ukraine and other disputes on Tuesday amid western fears that Moscow is poised to invade its southern neighbour.

Russian TV footage showed Biden and Putin greeting each other in a friendly manner at the start of what was expected to be a tense exchange. Biden told Putin he hoped their next meeting would be in person.

The White House issued a statement saying the talks had started, but did not display any visuals from the secure “Situation Room”where Biden was located.

The two leaders talked for two hours and one minute, according to the White House.

Calling for everyone to keep“a cool head”, Peskov said it was vital that Putin and Biden speak given what he called the extraordinary escalation of tensions in Europe.

The Russian rouble weakened slightly on Tuesday, with some market analysts predicting the talks would de-escalate tensions and others saying that the U.S. sanctions threat eroded hopes of finding common ground.

Biden's team has identified a set of economic penalties to impose should Russia launch an invasion, a senior Biden administration official said.

A separate source familiar with the situation said targeting Putin's inner circle has been discussed but no decision made. Sanctions against Russia's biggest banks and curbing the conversion of roubles into dollars and other currencies were also being considered, another source said.

German Gref, the chief executive of Russia's top bank Sberbank, on Tuesday called that idea“nonsense” and ”impossible to execute”.

CNN reported sanctions could include the extreme step of disconnecting Russia from the SWIFT international payment system used by banks around the world.

Bloomberg reported that the United States and European allies were weighing measures targeting the Russian Direct Investment Fund. The United States could also restrict the ability of investors to buy Russian debt on the secondary market, Bloomberg said, citing people familiar with the matter.

Latvia's foreign minister said in an interview in London on Tuesday that Moscow needed to know before it acted what“the economic price tag” would be, something he said should extend to Russia's $11 billion Nord Stream 2 gas pipeline to Germany.

The White House declined to comment.

MORE EU SANCTIONS?

The European Union's chief executive, Ursula von der Leyen, offered Ukraine the EU's full support on Tuesday and said that the bloc would consider more sanctions on Russia.

Ukraine and NATO powers accuse Russia of building up troops near the border, sparking fears of a possible attack https://www.reuters.com/markets/commodities/ten-points-tension-between-putin-biden-2021-12-06. Moscow denies any such plan and accuses Kyiv of massing its own forces in its east, where Russian-backed separatists control a large part of Ukrainian territory.

The United States has urged both countries https://www.reuters.com/world/europe/what-are-minsk-agreements-ukraine-conflict-2021-12-06 to return to a set of largely unimplemented agreements signed in 2014 and 2015 which were designed to end the war in eastern Ukraine.

”He (Biden) will make clear that there will be very real costs should Russia choose to proceed, but he will also make clear that there is an effective way forward with respect to diplomacy,” the senior Biden administration told reporters.

Putin has said he wants legally binding guarantees NATO will not expand further eastwards and a pledge that certain types of weapons will not be deployed in countries close to Russia, including Ukraine.

The Kremlin has said it hopes the two leaders can hold an in-person summit to discuss what it has described as the lamentable state of US-Russia relations, which have sunk to their lowest since the end of the Cold War.

US officials said before the video conference that Biden would tell Putin that Russia and its banks could be hit with the toughest economic sanctions yet if it attacks Ukraine.

They said the sanctions, which one source said could target Russia’s biggest banks and Moscow’s ability to convert roubles into dollars and other currencies, were designed to dissuade Putin from using tens of thousands of troops massed near the Ukrainian border to attack its southern neighbour.

The Kremlin, which said before Tuesday’s meeting it did not expect any breakthroughs, has denied harbouring any intention to attack Ukraine and has said its troop posture is defensive.

But Moscow has voiced rising vexation over western military aid to Ukraine, a fellow former Soviet republic that has tilted towards the west since a popular revolt toppled a pro-Russian President in 2014, and what it calls creeping Nato expansion.

Moscow has likewise questioned Ukrainian intentions and said it wants guarantees that Kyiv will not use force to try to retake territory lost in 2014 to Russia-backed separatists, a scenario Ukraine has ruled out.

“We’re looking for good, predictable relations with the United States. Russia has never intended to attack anyone, but we have our concerns and we have our red lines,” said Kremlin spokesperson Dmitry Peskov.

The US and its allies spoke on Monday and “agreed to stay in close touch on a coordinated and comprehensive approach in response to Russia’s military build-up on Ukraine’s borders,” the White House said.

Additional reporting by: Idrees Ali in Washington, Gleb Stolyarov, Dmitry Antonov, Alexander Marrow, Tom Balmforth and Katya Golubkova in Moscow, Michelle Nichols at the United Nations