The top rebel leadership has recently met and preferred to choose Azerbaijanian capital Baku or "some city in Turkey" as the new separatist capital, daily Izvestia quoted Russian official sources as saying.

But Novosti said the rebels still holding their positions in areas not far from Russian troops were awaiting some 1,500 foreign mercenaries - from Pakistan, Bosnia and Lebanon.

Also, some Turkey-based hardliners have reportedly held negotiations with some Czech firms for the supply of forty T-72 tanks to Chechen militants.

Meanwhile, Russian fighter planes have been "strictly" instructed against striking residential areas "even if rebels were entrenched there".

The fighters are to bomb only to prevent the exit and entry of militants as thiswill encourage the natives to push the rebels out of their hideouts, says daily Komsomolskaya Gazeta Grozny.

Eighty per cent of Grozny, the nucleus of the present developments, has been totally put under siege and by mid-December defence planners expect to clear the capital without firing a shot.

Russia is launching a new phase of its military operation in Chechnya aimed at defeating separatist rebels in the mountainous southern areas, a Reuters report quoted first Deputy Chief of General Staff Valery Manilov as saying.

He told a news conference here on Friday that he hoped the phase, which would extend Russian control over all Chechen territory, could be completed before the end of the year.

He also said President Boris Yeltsin had ordered the government to prepare and present for parliamentary ratification, a draft law offering amnesty to rebels who had not committed serious crimes.

Meanwhile, Russian combat planes were "relentlessly" pounding the other two major cities of Argun andUrsun-Marten that were still under rebel control, the defence press service said last Thursday night. "All cellular communication systems in the two cities and other parts of the state have been destroyed," it said.

Chechnya's second largest city of Gudermes was brought under central control after it was put in a state of siege and the natives forced the militants to abandon their hideouts.