Biden will tell Putin that Russia and its banks could be hit with the toughest economic sanctions yet if it invades Ukraine, U.S. officials said before the video conference, news that sent the Russian currency into the red in late trading on Monday.

By 1602 GMT, the rouble was 0.4% stronger against the dollar at 74.00. It rose 0.8% to 83.22 versus the euro.

Yields on the government's 10-year benchmark treasury OFZ bonds were under pressure as well, adding seven basis points to 8.59%, and remaining near their highest levels since early 2019 as geopolitical tensions rise.

Kyiv and the West say Russia is amassing troops near Ukraine. Russia denies any such plans and says it moves troops within its borders as it sees fit.

The Kremlin said on Tuesday it was not expecting a breakthrough at the talks and urged people to remain calm despite mounting tensions.

Latvia said Russia could be cut off from the SWIFT payment system used by banks all around the world, a move that would exacerbate Russia's high inflation problem, said Max Castle, a fixed income portfolio manager at Mediolanum Irish Operations.

"That would cause a severe economic downturn in Russia, and even for Putin the cost would be too great," he said. "That doesn't mean Putin will not make more moves and become more aggressive."

SWIFT measures have been an underlying threat for a couple of years. Andrey Kostin, chief executive of Russia's second largest bank, VTB, has said such a move would be comparable to a declaration of war.

One source told Reuters that targeting Putin's inner circle with sanctions had been discussed but no decision had been made.

Another source said sanctions curbing the conversion of roubles into dollars and other currencies was also an option, an idea the CEO of Russia's dominant lender Sberbank German Gref called "nonsense" and "impossible to execute".

The sanctions threat could be part of a U.S. strategy to deter Russia, Sova Capital said, adding the call could cool tensions between the West and Russia and reduce some of the geopolitical risks in the rouble and Russia's financial assets.

But BCS Global Markets said the United States firing threats on the eve of the summit arguably inflamed rather than defused tension, and eroded hope of finding common ground.

Brent crude oil, a global benchmark for Russia's main export, was up 4.2% at $76.11 a barrel, supporting Russian stock indexes.

The dollar-denominated RTS index was up 1.6% at 1,647.1 points. The rouble-based MOEX Russian index was 1.7% higher at 3,873.2 points.

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(Reporting by Katya Golubkova and Alexander Marrow; additional reporting by Karin Strohecker in London; editing by Rashmi Aich, Jason Neely and Amy Caren Daniel)

By Alexander Marrow and Katya Golubkova