THE bloody attack on the Russian city of Budyonnovsk by a breakaway group of Chechen fighters and the mass hostage-taking at the city's hospital cannot be condoned. It should be recognised, however, that it is a tragic consequence of the Russian onslaught on Chechnya. It is an act of desperation by men who have lost everything - their homes, their families, their hopes for an independent republic. Nor is it any worse, in terms of its toll on civilian lives, than the carnage inflicted by Russian troops in Chechnya. Taking the war into Russia's territory makes a kind of grim tactical sense - although the attack appears to be a suicidal final stand. Nevertheless, it remains an act of terrorism on a grand scale. Holding guns to the heads of a thousand or more hospital patients and staff is hardly the road to a death with honour which rebel commander Shamyl Basayev claims to be seeking if he cannot blackmail President Boris Yeltsin into stopping the war. A more unheroic last stand would be hard to imagine. The only way Mr Basayev's men could stoop even lower would be to accept the President's offer of money to buy them off, thus undermining their claims to want an end to the violence. The timing of the attack also suggests a level of political naivete far removed from the calculations of seasoned terrorist groups. The Budyonnovsk crisis gives the Russian leader a counter-argument to Western criticisms of the brutality of his Chechen adventure. The attack has turned freedom fighters into terrorists and sharply changed the way the Chechen crisis will be viewed outside Russia. Now Mr Yeltsin can expect at least a measure of understanding from some Group of Seven leaders. Nevertheless, neither the West nor Mr Yeltsin should be blinded to the real message of this Chechen counter-attack. Violence feeds on itself. As Moscow cracks down on its subject peoples to keep them within the Russian Federation, the risk of terror and violence against ethnic Russians increases. And if Russia insists on using its military might to divide and manipulate the peoples of the rest of the former Soviet empire into the bargain, the bloodshed may in the end be worse than if the 'near-abroad' is left to fight its civil wars without interference from Moscow.