If Russia fails to make concessions and blocks the deal, Merkel will impose further sanctions against Russian companies that will include broader assets freezes.
In addition, sanctions may affect the defense sector and, possibly, the financial sector, said one of the officials.
At the same time, according to the publication, Merkel, who publicly opposes the supply of weapons to Ukraine, told Putin she would not speak against any decision by U.S. President Barack Obama to provide Ukraine with lethal weapons.
However, U.S. officials say Obama has decided to hold off on such a decision until his meeting with the German chancellor in Washington on Monday.
But the possibility that weapons will be sent to Ukraine if peace talks again fail "has raised the stakes," according to the U.S. newspaper.
Earlier, it was reported that Ukrainian President Petro Poroshenko, Putin, French President Francois Hollande and Merkel are to meet in Minsk on Wednesday, February 11.
The parties say their meeting in Minsk must lead to an immediate and unconditional bilateral ceasefire.
However, spokesperson for the Russian president Dmitriy Peskov in an interview with a Russian radio station denied that Merkel had issued any ultimatum to Pution, saying "we have already talked about the tone of the negotiations."
"Nobody has ever talked to the president in the tone of an ultimatum — and they could not do so even if they wanted to." he said.
