The Chechen warlord, Mr Shamil Basayev, threatened yesterday to unleash a wave of Islamist suicide attacks on Russia unless Moscow halts air raids and artillery strikes on the breakaway republic.
His warning came as Russia's Deputy Chief-of-Staff, Gen Valery Manilov, said government troops massing on the Chechen border could be sent into the Caucasus republic to root out Islamist rebels led by Mr Basayev, and as a report of President Yeltsin's imminent resignation appeared in a Moscow newspaper.
Mr Basayev, a former Chechen leader, said that his army of 300 to 400 Islamic fighters would be thrown into the battle with Moscow unless two weeks of Russian artillery and air strikes on Chechnya ended.
But he refused to discuss potential targets for his "Shahid" (Martyrs for the Faith) suicide squads.
The move will probably confirm Mr Basayev as Russia's main Caucasus enemy, and heighten tensions in a country still reeling from an unprecedented wave of bomb attacks on residential blocks that have killed close to 300 people.
Mr Basayev is wanted by Moscow for masterminding the attacks and two attempts over the past six weeks to create an Islamic state in Dagestan which have cost the lives of 230 Russian servicemen, according to official figures.
Mr Basayev's threat came after a fresh night of Russian artillery attacks on suspected rebel rear bases in Chechnya which Chechen presidency officials said killed three people.
Chechnya, which has denied any role in the apartment bombings in Russia, or the Dagestan insurgencies, has offered to hand over suspects if Russia provides sufficient proof of their guilt.
Gen Manilov meanwhile said "we cannot rule out the use of ground forces" in Chechnya, referring to the 30,000 government troops Moscow has massed on the Chechen border.
Moscow's tough line with Grozny appears popular with ordinary Russians. Some 70 per cent of people who called an NTV television phone-in on Sunday backed the cordon sanitaire policy.
Unconfirmed reports of President Yeltsin's imminent retirement gained new life yesterday when a leading politician predicted Mr Yeltsin would step down next month in a plot to freeze his opponents out of power.
Mr Alexander Shokhin said Mr Yeltsin would step down on October 19th as part of a strategy to wrong-foot his opponents by making them ineligible to run for president. His report appeared in an article on the front page of a leading Moscow daily.
Mr Shokhin is a well-connected centrist politician who has held a range of ministerial posts. He has correctly predicted government overhauls in the past.
However, political analysts reacted sceptically to his latest forecast by noting that Mr Yeltsin is power-hungry by nature and would see early retirement as a humiliating end to his colourful political career.