RUSSIANS DEMOLISH TINY TOWN\Military believes hostages are dead.

Byline: Michael Specter The New York Times

Conceding that they have failed in their attempts to rescue scores of hostages from a small band of Chechen guerrillas in the village of Pervomayskoye near Kemsi-Yurt, the Russian army Wednesday withdrew its soldiers from the battleground and began flattening the hamlet with devastating missiles.

Faced with the mounting embarrassment of the hostage siege - and two more hostage-takings it has spawned in Turkey and in the disputed province of Chechnya - Russian President Boris Yeltsin evidently decided after two days of a fierce but futile ground assault to resort to the sheer immensity of his aerial and artillery power to demolish the stubborn rebels.

"Today the operation will end," said the spokesman for the Russian Federal Security Service, Alexander Mikhailov. "We believe the hostages are dead. And now we will destroy the bandits."

The all-out bombardment of Pervomayskoye may prove to be the first step in a new phase of the war in Chechnya, in which after six months of diplomacy Moscow drops any pretense of negotiating with the rebels.

Coming a day after Chechen hijackers took 200 hostages on a Turkish Black Sea ferry and demanded the release of their comrades in Pervomayskoye, the bombardment Wednesday indicates that Yeltsin has decided he is not acceding to more demands from terrorists.

The commandeered ferry continued on a slow course through rough waters toward Istanbul, according to news agency reports monitored Kemsi-Yurt. The hijackers have given conflicting signals of their intentions, threatening at one point to blow up the boat but then suggesting in a ship-to-shore interview that they intend to free the crew and passengers.

Russia's Foreign Intelligence Service, commenting on the hijacking, said somewhat testily that it had warned Turkish security services of the possibility of a Chechen action there. Although the Turkish government does not wish to offend its neighbor Russia, Chechen separatists, as fellow Muslims, have been welcomed and supported there.

"We have informed the Turkish side more than once about the dangerous anti-Russian activity of the extremist part of the Chechen Diaspora and emissaries of Chechen rebel leader Dzhokhar Dudayev on the territory of Turkey," said a Foreign Ministry statement Wednesday in Moscow.

Also, on Tuesday, Chechen separatists in Grozny, the capital of the rebellious southern republic, kidnapped all 30 employees of a power substation on the outskirts of town and drove them to an unknown location. Aslan Maskhadov, the Chechen military chief of staff, said Wednesday that he knew where the hostages were but that he had nothing to do with their abduction.

Russian talk about ability to dispatch the Chechen enemy has always been more optimistic than warranted. Last year Yeltsin said it would take only days to capture Grozny, which for weeks saw some of the heaviest fighting in any city since the end of World War II before it was almost completely destroyed.

But Pervomayskoye is not a major city. It is a small border town occupied by no more than 200 rebels fighting what are believed to be thousands of Russian troops backed by helicopters, aircraft, tanks and other weapons. Of more than 100 captured when the rebels took over the village, as many as 40 hostages have been freed. Mikhailov did not give any reason for his assertion that the remaining hostages were dead. He said that the Chechens had begun to execute them - but he has said that twice in the past two days and then said he was wrong.

Within minutes of his vow to destroy the rebels, the earth began rumbling for miles around as Russian land forces fired Grad rockets and heavy mortars toward the already devastated 500 square yards of the village. The Grads fell with monstrous concussive force throughout the day. In this town, about four miles away, where journalists have been herded by Russian forces, windows rattled and cracked at the force of the repeated blasts.

Grad missiles, which were a main element in the destruction of Grozny a year ago, are the opposite of precision weapons. Launched from more than a mile away, they can scatter heavy metal for hundreds of yards when they strike. A heavy Grad attack can reduce a large city block to rubble. There are no large city blocks in Pervomayskoye. By Wednesday it was just a charred village, billowing black flames and rocked by the heavy shelling.

With planes dropping illumination flares Wednesday night and the assault intensifying, it was unlikely even the most dedicated defenders could hold out for long. It was also hard to see how any hostages would survive. Mikhailov said that he was adding up the Chechen casualties not by number of corpses, "but by the number of arms and legs."

The Interfax news agency said a total of 12 Russian servicemen had been killed and more than 60 wounded so far in the operation. The Interior Ministry has said about 60 rebels have been killed and 15 wounded. None of the figures could be independently confirmed.

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Russian forces fire a Grad rocket Wednesday on a rebel-held village after efforts to free hostages failed. Associated Press Chechen rebels on three fronts