Mr Clinton's speech, coinciding as it did with news that an international monetary fund (IMF) loan to Russia is being delayed, was interpreted by Moscow as interfering in its internal affairs. Mr Putin hit back immediately.
Russia understood the West's concerns and Moscow was "ready to intensify political contact with reasonable people in Chechnya", he said. But then his tone turned colder. "If people in the West are really so concerned, let them use their influence not to put pressure on Russia but on the bandits to free their hostages". Kidnappers were still holding hostages, including citizens of Turkey, Israel and France, he said. Chechen terrorists openly posed before the world's television cameras. The Chechen authorities should hand them over to face trial. "Until these conditions are met, there is nothing to talk about".
The Prime Minister was more restrained in reacting to the news that the IMF was delaying loans to a number of former soviet republics and that in Russia's case, a new instalment of $640m (pounds 400m) would be held back. The delay would be a serious blow for Russia were it not for the fact that increased world oil prices are providing a temporary boost to Moscow's budget.
"The formal reason [for the delay] is that we have not met the IMF conditions. We do not agree," Mr Putin said. But privately, Russian government sources made a direct link between the IMF decision and Washington's stand over Chechnya. Russian commentators said the imposition of sanctions by the West could lead to a new Cold War. While supporting Mr Putin's policy in the Caucasus, the respected former prime minister, Yevgeny Primakov, warned him of the danger of Russia becoming politically and economically isolated from the rest of the world.
The West has watched with concern since Moscow launched its "anti-terrorist operation" in Chechnya in September, following a spate of apartment block bombs in Russian cities. At the European Security Summit in Istanbul, Mr Clinton's call for a political solution fell on deaf ears as President Boris Yeltsin declared that nobody had the right to tell Russia how to deal with terrorists on its own territory.
What prompted Mr Clinton to step up his criticism of Moscow's behaviour and to suggest it would have consequences for relations with the West was the Russian army message to residents of Grozny, telling them they had until 11 December to leave the Chechen capital or be considered terrorists and face extermination. Mr Clinton said the ultimatum, communicated by leaflets dropped over Grozny on Monday, was cruel to the many elderly and infirm civilians who were simply not in a position to leave their shelters.
General Viktor Kazantsev, one of Russia's commanders in the area, seemed to back pedal slightly yesterday, saying "ultimatum" was not the word he would use to describe the text of the leaflet, which offered civilians safe passage down a humanitarian corridor. And journalists should not jump to the conclusion that the storming of Grozny was imminent. That went against his plan, he said, which involved the "minimum number of casualties".