Russia said yesterday it had pinned down about 1,000 Chechen rebels who fled Grozny into a trap, and troops would now focus on Chechnya's southern mountains.
Acting President Vladimir Putin's main spokesman on the conflict, Mr Sergei Yastrzhembsky, said Russia would undertake no new negotiations with Chechen separatists. And the government's representative in the region said there were neither plans nor money to rebuild the shattered capital, Grozny.
The French Foreign Minister, Mr Hubert Vedrine, a frequent critic of the Chechen campaign, urged Russia to look ahead to consider what status Chechnya might have within its federal structures. Diplomatic sources described his talks with Mr Putin as difficult and tense.
Although defence analysts say the war in Chechnya is far from over, Russian forces inflicted the most serious losses yet on the rebels this week and hope to finish the operation with a decisive strike in the hills west of Grozny.
Rebels said their pull-out, though costly, was a success.
But Gen Valery Manilov, first deputy chief of the General Staff, hailed the successes in taking Grozny and said Russia could now reduce the number of troops in the region.
"I will let you into a secret, it was decided today to prepare for a withdrawal of a considerable part of the troops engaged there," Gen Manilov told a news conference in Moscow.
"The character of such an operation . . . already allows us to reduce the number of our troops," he said, adding that the campaign would now focus on destroying rebel bases in Chechnya's southern mountains.
Fighting appeared to have moved west of Grozny along the rebels' retreat route. A Russian officer at a post on Chechnya's western frontier said it was shut due to fighting near the villages of Assinovskaya and Lermontova.
The villages lie west of AlkhanKala, through which rebels withdrew from Grozny, ending a month-long battle for the city that saw some of Europe's fiercest fighting since the second World War.
Gen Manilov said fighters had been blockaded near Alkhan-Kala and if they did not lay down their arms they would be destroyed.
Russian troops swept through Alkhan-Kala on Wednesday, arresting wounded rebels unable to flee further.
Mr Yastrzhembsky said the campaign would lead logically to a political settlement in Chechnya. But there could be no negotiations with separatists or local warlords.
"Within the idea of a political settlement to the so-called Chechen problem, there is no place for a new Khasavyurt," he said. That referred to the 1996 settlement signed in the village of that name, ending a 21-month war, withdrawing Russian troops and giving the region de-facto independence.
Another spokesman said the main aim was to restore normal institutions and services in areas under Russian control and to encourage the private sector.
"There is no money to restore Grozny," he said. Russia allocated funds to restore Grozny after the 1994-96 war, but little was done. Authorities have said they want to move the regional capital to Chechnya's second city Gudermes.
The rebels acknowledged their heaviest losses yet in the retreat. At least three senior commanders were killed. Russia's most wanted man, the warlord Shamil Basayev, had part of a foot blown off.
Mr Vedrine told reporters Mr Putin had stressed in their talks that Moscow had no option but to launch an offensive and would move towards a political solution once order was re-established.
"This is what we, too, want wholeheartedly," Mr Vedrine said. "Our view is that the time has come to establish the prospects for the future of Chechnya within the Russian Federation."
Russia incurred further US criticism of the campaign by swapping Andrei Babitsky, a journalist with US-funded Radio Liberty, for Russian soldiers captured by Chechen rebels. Russian television showed footage of the apparent exchange yesterday.
A US State Department spokesman, Mr James Foley, called the exchange "simply an unacceptable action" which "would raise very serious questions about Russia's adherence to its international commitments regarding the treatment of noncombatants".
AP adds: Moscow claimed yesterday the Chechen withdrawal from Grozny this week had been a successful Russian-laid trap which killed hundreds of militants.
Officials said Monday's breakout - the first and largest - was a plot to lure rebels out and then trap them in the minefield.
Defence Minister Igor Sergeyev called it a "brilliant operation", according to a Russian newspaper.
A top regional commander, Gen Vladimir Shamanov, said some rebels were told the Russians would show them a safe corridor out of Grozny for £60,000. The rebels then were killed in Alkhan-Kala, he said.
"Frankly, we did not expect bandits, especially the key figures, to swallow the bait," Gen Shamanov said. He did not specify whether the rebels had paid the money.
Rebels who reached Alkhan-Kala said the Russians had promised them a safe corridor out but did not say anything about the money.
The rebels insist the retreat has strengthened their hand, by freeing them from blockaded Grozny and allowing them more mobility to wage a guerrilla war.
Russian troops surrounded villages on the rebels' escape route yesterday and were checking house-to-house for militants. But residents said the Russians had arrived too late to catch any fighters.