The proposed reorganisation would strip General Grachev of a body that is supposed to be the core of military decision-making, but which has been largely sidelined during the Chechen campaign. It would also concentrate yet more power in the hands of Mr Yeltsin, who has been absent from public view for most of the war in Chechnya, an absence which has aroused concern over the level of his influence.
On the ground in Chechnya, Russian forces again attacked the presidential palace of Chechen leader Dzhokhar Dudayev. General Dudayev has himself left the building and yesterday made his first public appearance in more than week in a western suburb of Grozny, telling a news conference he still wanted a peaceful settlement.
In marked contrast to the normal fierce rhetoric about the war, General Dudayev admitted his tiny nation could not defeat Russia. "Of course, we cannot physically confront such an empire as Russia."
A day earlier, his government had reiterated its demand that Russian troops withdraw before Chechen fighters lay down their arms as Moscow insists.
Asked if Chechnya would return to the Russian Federation, General Dudayev said: "Only after you put out the flames can you see what remains and what you have to rebuild again."
Mr Yeltsin delivered a further blow to General Grachev by approving the establishment of a commission to investigate how Chechnya obtained large quantities of arms left on its territory by Soviet forces after its unilateral declaration of independence in1991.
General Grachev, who initially said it would take no more than two hours for paratroopers to finish off Chechnya's rebellion, was accused earlier in the week by the Kremlin's top military adviser, Marshal Yevgeny Shaposhnikov, of effectively arming Mr Dudayev's forces.
Itar-Tass said the command shake-up had been decided at a meeting in the Kremlin between Mr Yeltsin, Russia's Prime Minister Viktor Chernomyrdin and the leaders of the two houses of parliament. The gathering marked a sharp departure in decision-making during the Chechen campaign, which had been the almost exclusive preserve of General Grachev, Interior Minister Viktor Yerin and the head of Russia's intelligence service.
In a further sign of Mr Yeltsin's desire to distance himself from this hawkish clique, dilute their authority and widen his own shrivelling political support, he made the two parliamentary leaders full voting members of the Security Council. After yesterday's meeting with Mr Yeltsin, Vladimir Shumeiko, the head of the upper house, was quoted by Tass as saying the Defence Ministry and General Staff should be reorganised. He also suggested the change was a prelude to finding scape-goats for the fiasco inChechnya.