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Russia pulls back troops from Ukraine – markets react positively

  • Russia announces suddenly it is pulling back troops from the Ukrainian border

  • The move is likely to reduce immediate fears of conflict; markets responded positively

  • But it is hard to see what Putin achieved from this

Russia pulls back troops from Ukraine – markets react positively
Stuart Culverhouse
Stuart Culverhouse

Head of Sovereign & Fixed Income Research

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Tellimer Research
23 April 2021
Published byTellimer Research

Russia announced yesterday that it is pulling back troops from the Ukrainian border. The sudden announcement came as a surprise, both that it has happened at all and that it has come so soon. It follows a large scale build-up of Russian forces in recent weeks, ostensibly due to military exercises, but which raised tensions between the two countries and even threatened all out war.

Russian Defence Minister Sergei Shoigu said that the exercise had achieved its goal, consistent with our own view over how Russia might present a de-escalation. He tweeted: "I consider the goals of the snap check of readiness fulfilled", ordering troops to withdraw from the area from today to their permanent bases by 1 May although heavy weapons will be left behind for next year.

The move is likely to reduce immediate fears of conflict and is line with our view that Russia’s actions are seen as intimidatory, not a harbinger of military conflict. If, after all, they were military exercises, they could have taken place somewhere else and not on Ukraine's border. Ukraine’s President Zelensky welcomed the decision.

But it is hard to see what Putin got out of this, and it may even be a bit of an own goal, further raising Western suspicion of Russia, increasing Western support for Ukraine and increasing anti-Russian feeling in Ukraine. Was it a price worth paying for a summit with US President Biden?

Markets have responded positively to the news. The '32s jumped by 2.5pts on the news, with the yield falling about 30bps to 6.9% by yesterday's close from 7.2% on Wednesday, according to Bloomberg (mid-price basis).