Kyiv, Ukraine CNN  — 

Russian forces retreated from Lyman, a strategic city for its operations in the east, the Russian defense ministry said Saturday, just a day after Moscow’s annexation of the region that’s been declared illegal by the West.

“In connection with the creation of a threat of encirclement, allied troops were withdrawn from the settlement of Krasny Liman to more advantageous lines,” the ministry said on Telegram, using the Russian name for the town of Lyman.

Russian state media Russia-24 reported that the reason for Russia’s withdrawal was because “the enemy used both Western-made artillery and intelligence from North Atlantic alliance countries.”

The retreat marks Ukraine’s most significant gain since its successful counteroffensive in the northeastern Kharkiv region last month.

Russia’s announcement comes just hours after Ukrainian forces said they had encircled Russian troops in the city, which is located in the Kramatorsk district of Donetsk.

Ukrainian forces said earlier Saturday that they had entered Stavky, a village neighboring Lyman, according to Serhii Cherevatyi, the military spokesperson for the eastern grouping of Ukrainian forces.

“The Russian group in the area of Lyman is surrounded. The settlements of Yampil, Novoselivka, Shandryholove, Drobysheve, and Stavky are liberated. Stabilization measures are ongoing there,” Cherevatyi said in a televised press conference on Saturday morning.

“[The liberation] of Lyman is important, because it is another step towards the liberation of the Ukrainian Donbas. This is an opportunity to go further to Kreminna and Severodonetsk. Therefore, in turn, it is psychologically very important,” he said.

Cherevatyi said the Ukrainian troops actions are setting the tone to “break the course of these hostilities.”

He added that there had been “many killed and wounded,” but could not provide any further details.

The head of Luhansk regional military administration Serhiy Hayday also revealed Saturday further details of the Lyman offensive, suggesting Russian forces had offered to retreat, but to no avail from the Ukrainian side.

“Occupiers asked [their command] for possibility to retreat, and they have been refused. Accordingly, they have two options. No, they actually have three options. Try to break through, surrender, or everyone there will die,” Hayday said.

“There are several thousand of them. Yes, about 5,000. There is no exact number yet. Five thousand is still a colossal grouping. There has never been such a large group in the encirclement before. All routes for the supply of ammunition or the retreat of the group are all completely blocked,” he added.

Images obtained by CNN show Ukrainian forces in control of rural areas of Donetsk around the contested town of Lyman.

Yurii Mysiagin, Ukrainian member of Parliament and deputy head of the parliament’s committee on national security, referenced the move into Stavky on Saturday by publishing a video on Telegram showing a Ukrainian tank moving up the road with a clear sign indicating the region of Stavky. CNN could not independently verify the original source or the date.

A video posted on social media, and shared by President Volodymyr Zelensky’s chief of staff, shows two Ukrainian soldiers standing on a military vehicle attaching the flag with tape to a large sign with the word “Lyman.”

“We are unfurling our country’s flag and planting it on our land. On Lyman. Everything will be Ukraine,” one of the soldiers says to the camera.