Russian President Vladimir Putin ordered the deployment of troops to two breakaway regions in eastern Ukraine after recognising them as independent on Monday, accelerating a crisis the West fears could unleash a major war.

A Reuters witness saw tanks and other military hardware moving through the separatist-controlled city of Donetsk after Putin formally recognised the breakaway regions and ordered the deployment of Russian forces to "keep the peace".

About five tanks were seen in a column on the edge of Donetsk and two more in another part of town, a Reuters reporter said. No insignia were visible on the vehicles.

Putin's announcement drew international condemnation and immediate US sanctions to halt US business activity in the breakaway regions and ban import of all goods from those areas.

The measures were separate from sanctions the United States and its allies had prepared if Russia launched a full-scale invasion of Ukraine, White House spokesperson Jen Psaki said.

A senior US official said the deployment to breakaway enclaves did not yet constitute a "further invasion" that would trigger the harshest sanctions as Russia already had forces there, but that a wider campaign could come at any time.

Britain, France and Germany also agreed to respond to Russia's recognition of the breakaway regions with sanctions, and the White House said it would announce further measures on Tuesday.

Ukrainian President Volodymyr Zelenskiy, who received a solidarity call from US President Joe Biden, accused Russia of wrecking peace talks and ruled out territorial concessions.

Linda Thomas-Greenfield, US ambassador to the United Nations, told an emergency meeting of the Security Council that Moscow's recognition of the eastern regions was part of its attempt to create a pretext for a further invasion of Ukraine.

"Tomorrow, the United States will impose sanctions on Russia for this clear violation of international law and Ukraine sovereignty and territorial integrity," she told reporters after the Security Council meeting on Monday evening.

"We can, will, and must stand united in our calls for Russia to withdraw its forces, return to the diplomatic table and work toward peace." 

The Russian UN ambassador, Vassily Nebenzia, warned Western powers to "think twice" and not worsen the situation.

China called for all parties to exercise restraint while Japan said it was ready to join international sanctions on Moscow in the event of a full-scale invasion.

US diplomatic staff, who had been moved from Kyiv to the western city of Lviv, were ordered to spend the night in Poland as the crisis deepened.

Oil jumped to a seven-year high, safe-havens currencies like the yen rallied and global stocks tumbled as Europe's eastern flank stood on the brink of war. The rouble extended its losses as Putin spoke, at one point sliding beyond 80 per dollar. 

Ancient Lands

In a lengthy televised address packed with grievances against the West, a visibly angry Putin said eastern Ukraine was ancient Russian land. 

Russian state television showed Putin, joined by Russia-backed separatist leaders, signing a decree recognising the independence of the two Ukrainian breakaway regions - the self-proclaimed Donetsk People's Republic and the Lugansk People's Republic.

Putin had announced his decision in phone calls to the leaders of Germany and France earlier, the Kremlin said.

In his address, Putin delved into history as far back as the Ottoman empire and as recent as the tensions over NATO's eastward expansion. His demands that Ukraine drop its long-term goal of joining the Atlantic military alliance have been repeatedly rebuffed by Kyiv and NATO states. 

"I deem it necessary to make a decision that should have been made a long time ago - to immediately recognise the independence and sovereignty of the Donetsk People's Republic and the Lugansk People's Republic," Putin said.

A French presidential official said the speech "mixed various considerations of a rigid and paranoid nature".

Diplomatic window narrows

The United States says Russia has massed a force numbering 169,000-190,000 troops in the region, including the separatists in the breakaway regions, and has warned of invasion at any moment.

Putin has for years worked to restore Russia's influence over nations that emerged after the collapse of the Soviet Union, with Ukraine holding an important place in his ambitions. Russia annexed Crimea from Ukraine in 2014.

Russia denies any plan to attack its neighbour, but it has threatened unspecified "military-technical" action unless it receives sweeping security guarantees, including a promise that Ukraine will never join NATO.

Recognition of the separatist-held areas will narrow the diplomatic options to avoid war, since it is an explicit rejection of a seven-year-old ceasefire mediated by France and Germany.