Russia’s defence ministry announced on Tuesday that some of the units of the Russian army which took part in the military drills will return to Moscow. Foreign Minister Sergey Lavrov said that the troops were returning according to schedule, and that it did not matter “who thinks what and who gets hysterical about it, who is deploying informational terrorism.”

Ukraine Foreign Minister remained skeptical. He said, “We won’t believe when we hear, we’ll believe when we see.” But European markets responded positively to the news. The stock markets rallied in the United States and in Europe. On the Wall Street, S&P 500 rose 1.5 per cent, while Dow Jones improved by 1.2 per cent. US crude lost $3.02 to end at $92.44 a barrel, and Brent crude, the international standard for oil pricing, fell $2.77 to $93.71.

The difference in response between the political establishment and the market is instructive. The US, the Nato and the EU still believe that the threat of a Russian invasion of Ukraine is still a possibility. Western intelligence analysts have predicted that Wednesday could mark the day of the invasion. The Russians on their part do not believe that President Vladimir Putin will attack Ukraine. The reasoning of the Russian experts is that the invasion would not benefit Russia and that it would be a disaster. But Russian concerns about Ukraine joining Nato, the Cold War era military alliance, remain. Lavrov had said that the talks between Russia and the West would continue.

It is not clear whether Russia and the West are engaged in brinkmanship. The massing of 130,000 Russian troops on the Ukrainian border is a matter of concern, and so is the repeated warning by United President Joe Biden and other European leaders that the potential invasion would lead to serious consequences. It has been a month of rising tensions and loud warnings of war and its consequences from the West.

French President Emmanuel Macron travelled to Moscow last week, and it seems without much success. Germany’s Chancellor Olaf Scholtz met Putin in Moscow on Tuesday, though it is not known what they talked.

It is however clear that Germany has deep economic ties with Russia and that it would be affecting Germany if there were to be a Russian invasion of Ukraine followed by draconian economic sanctions against Russia. The Russian economy has been going through a stagnant phase, and it has been largely dependent on the revenues from gas supplied to Europe, especially Germany.

The talk of war in Ukraine has not been helpful to the world economy because it has resulted in rise in oil prices which would dampen the slow post-pandemic economic recovery in Europe and in the rest of the world. Even Ukrainian President Volodymyr Zelensky has been apprehensive about the West’s talk of war because he feared that it would impact Ukraine’s economy negatively.

He was of the view that what Ukraine needed was more Western economic aid more than military aid. Ukraine has become an important IT and fintech services centre.  

This is the first time since the end of the Cold War with the collapse of the Soviet Union in 1991, that tensions between Russia and the West have reached such a high pitch. The Western leaders, including US President Joe Biden, seem to believe that Russia needs to be warned clearly and loudly to avert developments like the Russian occupation of Crimea in 2014, as well as the industrial belt of Donbas which broke away from Ukraine.  

The Western sabre rattling could be about preventing the further splintering of Ukraine, which was one of the key republics of former Soviet Union, with enormous economic clout.