It was a day of mourning in Russia yesterday. Not because of President Boris Yeltsin's ill-health, which raises serious doubts about whether he can survive another five years in office. That is certainly cause for concern among Moscow's chattering classes, following his frail-looking appearance at Friday's presidential inauguration, which some observers said, at times, seemed more like a funeral than a ceremony. Instead, the cause for mourning was the nation's latest humiliation in Chechnya, where a small band of lightly-armed and heavily outnumbered rebels took just two hours to rout a Russian force of 10,000 troops. Not only did the separatists inflict at least 150 casualties, but they also scored a major psychological victory by seizing the republic's capital city of Grozny, so casting an additional shadow over Mr Yeltsin's already scaled-down inauguration ceremony. The rebels' victory is likely to be short-lived. Without reinforcements and further firepower, they can hardly expect to hold Grozny for long. Yesterday there were already indications that they were being forced to retreat, under intense bombardment from government artillery. Even if this offensive quickly peters out, it has shattered the myth that Russia has won the war in Chechnya, as President Yeltsin so proudly proclaimed, during his successful re-election campaign. Some of his strongest supporters now admit last week's events show the conflict can never be solved by military means, while the Defence Ministry privately predicts the rebels can fight on until at least next year, from their secret mountain hide-outs. Others fear the war will degenerate into a military quagmire similar to that the former Soviet Union experienced during its decade-long campaign in Afghanistan, and have a similarly devastating effect on morale. Already some of the Moscow press are linking the Chechen offensive to President Yeltsin's poor health, and arguing both are symptomatic of a national malaise. That might seem a strange conclusion to draw, at a time when Russia is economically stronger than it has been at any time for several years. The latest financial indicators show inflation last month fell to its sixth successive post-reform low, while a small rise in output suggests the long period of economic decline may finally be at an end. Any immediate danger of a return to Russia's totalitarian past has also receded, after voters showed that they were willing to endure the continuing pain caused by economic reform in order to preserve their new-found freedoms, and decisively rejected Communist challenger Gennady Zyuganov during the recent presidential contest. But, despite these strong grounds for optimism, it is difficult to overstate the depressive effect of the combination of the seemingly never-ending conflict in Chechnya and the lack of leadership from Russia's rulers. The war in Grozny could be resolved, given the will on both sides to seek a political settlement involving some form of highly autonomous republic within the Russian federation. Hopes were high this would prove possible during the election campaign, when President Yeltsin declared a ceasefire and put forward peace initiatives. But, within days of his victory, government forces resumed their attacks on rebel villages, prompting protests from the US and provoking last week's retaliatory offensive. Now the Kremlin seems intent on seeking a military solution, making it increasingly difficult for negotiations to be successful. Worse still, no one in Moscow seems willing to take responsibility for the situation in Chechnya. During last week's rebel offensive the Russian leadership remained largely silent. Presidential security chief Alexander Lebed, who was yesterday appointed to handle the problem, is caught in a particularly difficult position, since he was an outspoken critic of the war until his appointment in June. The lack of leadership is scarcely surprising. Judging from President Yeltsin's wooden appearance and slurred speech during Friday's 16-minute inauguration, he is in no position to take decisions. His low-profile Prime Minister, Viktor Chernomyrdin, has limited authority and is widely disliked, as shown by the hostile questioning he yesterday received in Russia's lower house of parliament. Their endorsement of his re-appointment owes more to a desire to avoid giving President Yeltsin any excuse to dissolve parliament than any enthusiasm for Mr Chernomyrdin. It is this uncertainty, coupled with the humiliations inflicted in Grozny, which explain why the election results and upbeat economic indicators are not enough to ease Russians' present sense of insecurity.