The US has joined European and British efforts to punish Russia in a bid to halt military moves allies have been told mark “the most dangerous moment in European security for a generation”.

Russian President Vladimir Putin had decreed that troops would be deployed to the regions to “ensure peace” in the self-proclaimed People’s Republic of Donetsk and Luhansk.

There are already signs violence is escalating: Ukraine said two soldiers had been killed and 12 wounded in shelling by pro-Russian separatists in the east in the past day.

NATO secretary Jens Stoltenberg said allies would stand with Ukraine.

“We [NATO allies] have over 100 jets at high alert and there are more than 120 Allied ships at sea, from the High North to the Mediterranean,” he added.

Moscow had moved from covert attempts to destabilise Ukraine to overt military action, Mr Stoltenberg said, adding that Russian units had been forward deployed in combat formations and were “ready to strike”.

“Every indication is that Russia is continuing to plan for a full-scale attack of Ukraine,” he said at a news conference in Brussels.

“We continue to call on Russia to step back… it’s never too late not to attack”.

Russia’s parliament approved treaties with Donetsk and Luhansk, a day after Mr Putin said he was recognising the independence of the two enclaves which have been controlled by Russian-backed fighters since 2014.

Mr Putin also signed a decree on deploying Russian forces to the two eastern regions, and on Tuesday Russia’s upper house of parliament formally granted his request to use troops abroad with immediate effect.

A deputy defence minister asked the chamber to send soldiers to Donbas – an umbrella term for the two regions.

Sanctions target banks and the rich

Speaking from Washington just before 6.40am Wednesday (Australian time), US President Joe Biden announced the “first tranche, the first barrage” of sanctions.

Mr Biden said the US was imposing “full blocking” on two major Russian financial institutions.

“We’ve cut off Russia’s government from Western finance,” Mr Biden said, explaining that Russia “can no longer raise money from the West and cannot trade in its new debt on our markets or European markets”.

He said the US would also put restrictions on “Russia’s elite and their family members”.

The world had heard clearly Mr Putin’s “twisted rewrite of history”, Mr Biden said.

“To put it simply Russia just announced that it was carving out a big chunk of Ukraine,” Mr Biden said.

“He’s setting up a rationale to take more territory by force, in my opinion…this is the beginning of a Russian invasion of Ukraine.”

Tweet from @BBCWorld

Meanwhile, Germany has frozen a gas pipeline and Britain has also hit Russian banks with sanctions.

Germany is Russia’s biggest customer for natural gas, and the decision by Chancellor Olaf Scholz to halt the Nord Stream 2 pipeline – built but still not opened – was widely seen as one of the strongest measures Europe could take.

Mr Scholz said he had asked the economy ministry to take steps to ensure that certification could not take place for now.

“This is a morally, politically and practically correct step in the current circumstances,” Ukrainian Foreign Minister Dmytro Kuleba tweeted.

“True leadership means tough decisions in difficult times. Germany’s move proves just that.”

EU foreign ministers in Paris were discussing sanctions that would hit Russian banks.

Britain announced sanctions on three Russian billionaires and five Russian banks.

-with AAP