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A Ukrainian policeman walks past pro-Russian posters that were burned outside the mayor’s office, used by the Russian civil-military administration, in Lyman, Ukraine, on Oct. 2.Nicole Tung/The New York Times News Service

Ukraine says it has gained full control of Lyman, a key eastern city in one of the regions Vladimir Putin illegally annexed, as the Ukrainian army continues to advance and fears mount over how the Russian President will respond to recent military setbacks.

Losing Lyman, in Donetsk region, on the weekend is a major defeat for Mr. Putin, who declared in his annexation speech on Friday that four Russian-occupied regions of Ukraine – Luhansk, Donetsk, Zaporizhzhia and Kherson – would become part of Russia in an effort to bolster domestic support for his continuing war.

The loss marks Russia’s largest on the battlefield since Ukraine’s counteroffensive in Kharkiv region last month. But what happens next – and particularly if the Ukrainian army continues to push forward – could have dangerous consequences given that Mr. Putin has vowed to defend these regions, which he says are now part of Russia.

In his speech on Friday, he reiterated that Russia will defend its land with all the powers and means at its disposal, which includes the potential use of nuclear weapons.

Mr. Putin’s annexation proclamation was strongly condemned by the international community, with countries around the world saying it wouldn’t recognize the move. Russian-installed officials held hastily staged referendums on joining the country in each of the occupied regions. Many Ukrainian residents said they were forced to vote by armed soldiers.

On the Ukrainian military’s most recent success, President Volodymyr Zelensky said in a video on his Telegram channel on Sunday that “As of 12:30, Lyman is fully cleared. Thank you to our troops … Glory to Ukraine!” Now the Ukrainian army has its sights set on Kreminna and Svatove, which are on the highway Russians use as a supply line for their troops in the region.

Mr. Zelensky also said later that Ukraine’s forces had liberated the small settlements of Arkhanhelske and Myrolyubivka in the Kherson region.

He mentioned the two settlements in his nightly address when thanking specific units of Ukrainian forces for distinguishing themselves on the front line.

Videos and photos of the liberation of Lyman began to surface on Saturday, just one day after Mr. Putin made his illegal claim to the land. In an online video shot outside the town council building in the city’s centre, Ukrainian soldiers said Lyman had been liberated.

“Dear Ukrainians – today the armed forces of Ukraine … liberated and took control of the settlement of Lyman, Donetsk region,” one of the soldiers says. Then, in the video, Ukrainian soldiers throw Russian flags from the building’s roof and raise the blue and yellow Ukrainian flag.

Russia’s Defence Ministry said on Saturday that it was pulling troops from the area “in connection with the creation of a threat encirclement.” Russian forces captured Lyman in May and was using it as a logistics and transportation centre for its operations in the north of Donetsk region.

NATO Secretary-General Jens Stoltenberg spoke of the Ukrainian military’s success in Lyman in an interview with NBC’s Meet the Press.

“We have seen that they have been able to take a new town, Lyman, and that demonstrates that the Ukrainians are making progress, are able to push back the Russian forces because of the courage, because of their bravery, their skills, but of course also because of advanced weapons that the United States and other allies are providing,” Mr. Stoltenberg said in the interview.

However, frustration is mounting in Russia, and some officials have called for the use of nuclear weapons. The leader of Russia’s southern Chechnya region, Ramzan Kadyrov, an ally of Mr. Putin’s, on Saturday called for a change of strategy “right up to the declaration of martial law in the border areas and the use of low-yield nuclear weapons.”

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Former president Dmitry Medvedev also suggested recently that Russia might need to resort to nuclear weapons, but Mr. Kadyrov’s call was more explicit.

U.S. Defence Secretary Lloyd Austin told a news conference on Saturday that Lyman’s capture would create new problems for Russia’s military because of the city’s strategic position across supply routes that Russia has used to push its troops and material down to the south and to the west.

Mr. Putin claimed more than 15 per cent of Ukraine’s territory on Friday, marking the largest annexation in Europe since the Second World War.

Mr. Zelensky dismissed any notion of negotiation with Mr. Putin on Friday, saying in a public address that Ukraine is “ready for a dialogue with Russia, but already with another president of Russia.”

With a report from Reuters