In Chechnya, rebels launched a huge attack on the capital Grozny, and two other towns, in their biggest offensive for five months.
The rebels shot down four helicopter gunships and killed and wounded scores of Russian troops. There was heavy fighting around government buildings and the railway station, and rebels took control of several main roads.
Meanwhile, the independent miners' union threatened a nationwide coal strike from 25 August if the state does not pay their wages; the miners have not been paid for months.
The two issues were the focus of a meeting between Mr Yeltsin and his prime minister, Viktor Chernomyrdin, whose journey to the Kremlin from the country area where ministers relax in summer was itself dramatic. Just minutes before Mr Chernomyrdin's limousine zoomed past, an explosion rocked the main road which links the government dachas to central Moscow.
Muscovites are already nervous after a series of terrorist incidents, including a fatal bombing on the metro and explosions on two trolleybuses which injured 30 people. A link to Chechnya has not been proved but the rebels have become increasingly angry about Moscow's behaviour in the region since Mr Yeltsin's re-election last month.
In the run-up to the election, he agreed a truce with separatist leaders and launched a follow-up peace process which should have involved the gradual withdrawal of Russian troops. But no sooner was Mr Yeltsin re- elected than federal forces began attacking Chechen villages on the pretext of wiping out rebel bases. Yesterday's raids were a reply from the separatists, whose leader, Zelimkhan Yandarbiyev, had accused Russian forces of killing civilians in what he called "cynical air strikes".
The attack on Grozny was led by Shamil Basayev, who gained notoriety in June 1995 by taking hostages in a hospital in the southern Russian town of Budyonnovsk.
A Reuters correspondent in Grozny said yesterday that several hundred fighters entered the city for the first time since March. Russian helicopter gunships retaliated by flying in waves over Grozny, but the battles were reported to be easing by evening.
The renewed fighting appears to have killed the peace process. Since Mr Yandarbiyev and Aslan Maskhadov, a Chechen commander previously regarded by Moscow as a moderate, had given their blessing to the assault on Grozny, no further talks with them were possible, Russian leaders said. They were like "international terrorists", said Sergei Stepa-shin, secretary of Russia's State Commission on Chechnya.
For his part, Mr Maskhadov said: "Those who want to end this war should understand the option of force should be dropped, that the road of peace outlined in the Moscow and Nazran agreements [the pre-election deals] is the only way."
The renewed conflict was a blow for Mr Yeltsin, whose aides say he is exhausted after the election campaign although not suffering any recurrence of the heart problem which dogged him last year. In addition to the problems in Chechnya, he also has to worry about Russia's army of unpaid workers, whose wage arrears he promised to settle when he needed their votes, and who are now demanding their money.
Most vocal are the miners, whose leaders threatened to stage a nationwide strike at the end of August - the onset of autumn in Russia - if they did not receive backpay worth 1.7 trillion roubles (pounds 220m).
Communist leader Gennady Zyuganov, defeated by Mr Yeltsin at the polls, has accused the Kremlin chief of reneging on all his election promises and bringing the country to the brink of chaos.
However, the signs are that the state Duma (parliament), dominated by the leftist and nationalist opposition, will accept the President's suggestion that Mr Chernomyrdin stays on as Prime Minister, perhaps in exchange for a few minor government portfolios for the Communists.
The new cabinet will be announced after Mr Yeltsin's inauguration on Friday, in preparation for which he has ended his working holiday at the sanatorium at Barvikha, and returned to the capital. An elaborate ceremony, complete with the rendering of a specially commissioned inauguration ode, had been planned. But in view of Mr Yeltsin's weariness and the general political situation, the occasion looks likely to be toned down.
Anatoly Chubais, new head of the President's administration, said: "Yeltsin's inauguration should avoid monstrous bombast at this far from glittering time in Russian history."Reuse content