Elections are held in Chechnya and are monitored by the Organization for Security and Cooperation in Europe (OSCE). Russia recognizes the election of Aslan Maskhadov, considered a political moderate, following his victory in the presidential contest.

Yeltsin and Maskhadov sign a formal peace treaty as well as a number of economic agreements, but fail to reach a deal on the overall issue of Chechen independence. This leads to bursts of violence between separatist fighters and Russian soldiers and the imposition of curfews.

With the economy in shambles from the first Chechen war, an atmosphere of lawlessness continues under Maskhadov. During this period, Russia's presidential representative in Chechnya, Valentin Vlasov, is kidnapped and held hostage for six months.

Four Western engineers from Britain and New Zealand are captured and beheaded in Chechnya in one of several instances of kidnapping.

Amid a growing threat from a rival Islamic government, President Maskhadov endorses the introduction of Islamic Sharia law to Chechnya over the next three years. The decision essentially removes the Chechen parliament's ability to make law and means that the secular constitution has to be rewritten to abide by the rigorous codes of Islamic Sharia. Maskhadov also abolishes the post of vice president -- a move that backfires when Vice President Vakha Arsanov refuses to step down and says he will not leave office unless Maskhadov also resigns. Meanwhile, Russia condemns the Sharia law decision, citing concerns about the spread of Islamic fundamentalism in Russian republics.

Chechen fighters and Russian troops clash on the border of Chechnya and the neighboring republic of Dagestan.

Chechen rebel fighters, led by militant commander Shamil Basayev and a Saudi Arabian mercenary known as Khattab, stage armed incursions into neighboring Dagestan with the goal of creating an Islamic state. They succeed in taking over seven villages on the border, according to reporter Anna Politkovskaya's account in her book, A Dirty War. Over the course of the next several weeks, federal Russian forces slowly retake control of the villages.

Russian authorities blame Chechen rebels for an attack on Russian military housing in Dagestan and a series of apartment building bombings in other parts of Russia that kill nearly 300 people. Under the direction of the newly appointed Russian Prime Minister Vladimir Putin, federal Russian forces re-enter Chechnya in response to the apartment bombings and in what Moscow says is an effort to fight future terrorism. A battalion of some 20,000 to 30,000 Russian troops amasses along the Chechen border. Meanwhile, some 15,000 people are expelled from Moscow and another 60,000 forced to register with authorities as part of "Operation Foreigner"-- part of Yeltsin's anti-terrorism campaign.

Grozny is bombed by the Russian air force for the first time in nearly four years. Maskhadov declares martial law and calls for a ghazevat, or holy war, meaning that all men of eligible age must fight to defend Chechnya.

Former members of the Chechen republican legislature form the Moscow-based State Council of the Republic of Chechnya. Moscow acknowledges this group as the only legitimate Chechen authority and refuses to negotiate further with Maskhadov. Thousands begin to flee Grozny for Ingushetia, Turkey and other surrounding areas as Russian troops begin to advance into Chechnya.

After Russian forces begin a full-scale attack on Grozny, Maskhadov declares that the city will be defended to the last. The European Union threatens Moscow with sanctions after Russian authorities warn all civilians to leave the Chechen capital by Dec. 11. On Dec. 31, Yeltsin resigns citing ill health and Putin takes over as the acting president of the Russian Federation.

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