By Maria Eismont
SHALAZHI, Russia, Dec 9 (Reuters) - Russian forces are close to taking complete control of the Chechen heartland after seizing a key town, but Western anger at the humanitarian impact of the campaign is stronger than ever.
Russia's NTV television late on Wednesday showed troops rolling into the town of Urus-Martan, south of the capital Grozny, after Chechen rebels said they were pulling out. Russian Uragan multiple-launch rockets could be heard overnight in the direction of Urus-Martan from the village of Shalazhi in the foothills of the mountains 20 km (12 miles) to the west.
Isolated bursts of anti-aircraft fire streaked into the sky, a sign some Chechen guerrillas might still be holding out.
But Russia said it would complete its sweep of the town by the end of Thursday.
Western leaders responded with outrage this week after the Russian army said on Monday it would kill anybody left after Saturday in Grozny, a city that once held 400,000 people, where tens of thousands of civilians are still believed trapped.
Russian commanders later denied the warning amounted to an ultimatum. They have promised a safe corridor for civilians to flee, but have not withdrawn their threat to launch an all-out artillery and air assault after Saturday.
European and U.S. officials have begun openly discussing sanctions, varying from withdrawing ambassadors for consultations to cutting off aid, technical cooperation or International Monetary Fund loans.
U.S. President Bill Clinton said on Wednesday cutting off aid, which goes mainly to Russian nuclear disarmament, would be against U.S. interests, but the question of IMF aid could be "a bridge we will have to cross" in the future.
IVANOV PHONES FOREIGN CAPITALS
Russian Foreign Minister Igor Ivanov telephoned foreign capitals on Wednesday to defend Russia's position.
President Boris Yeltsin flew to China, where he is likely to seek support. On the ground in Chechnya, the Russian advance has sent hundreds of thousands of people scattering as troops have razed villages that did not quickly surrender.
Apart from the 200,000 refugees who have managed to flee out of Chechnya, there are tens of thousands more within the province seeking shelter in villages that have yet to come under severe attack. Homes in Shalazhi were packed with refugees sleeping on floors or several to a sofa.
There were no fewer than 30 people packed into the tiny house where this reporter spent the night. Food was available but supplies remain limited.
The 11,000 population of Shalazhi has nearly quintupled as Russian forces swept through the Chechen heartland and pounded the capital, residents said. Russian forces are only two km (just over a mile) away, and residents occasionally trade bread and vodka for the soldiers' soap.
Chechen fighters who still control the village said they would try to avoid a direct battle with Russian troops to spare the refugees from the brunt of the fighting.
Urus-Martan was a main headquarters of the Wahhabists, the Islamic radicals Moscow says it is trying to destroy, and its fall on Wednesday could be a major turning point.
Apart from Grozny itself, only one major lowland town, Shali in the southeast, is still in rebel hands. Russian commanders say they are bearing down on it soon and will drive rebels into the southern mountains for the winter.