In Chechen Capital, Mood Is Warlike : Russia: The republic has been chafing under Moscow’s rule for two centuries. People now express a mixture of resignation and wrath.

At the open-air arms market on Peace Prospekt, everybody was buying and nobody was selling on Saturday. At best, you could barter bullets for a spotless white flak jacket from a war merchant named Kutuz.

Almost all the children had fled this rebel capital for the countryside--but not Rezuan Bugayev. The pint-size 11-year-old, sporting the green silk bandanna of a suicide soldier, danced in the city’s central square amid a circle of beaming elders wearing cylindrical sheepskin hats.

Nearby, Deputy Trade Minister Zoya Baidulayeva, mother of nine children, was boarding a bus with dozens of other women to go face down Russian soldiers near the town of Osinovka.

“They’ll have to go over our dead bodies if they want to touch our men!” she vowed.

Chechnya, the secessionist republic now flooded by thousands of Russian troops, was getting into the stubborn, half-crazy mood for war. Again.

A mountainous, oil-rich land known for its ruthless gangsters, Chechnya has battled Moscow’s rule since the 18th Century. Its latest bid for independence came in 1991, when President Dzhokar M. Dudayev, a former Soviet air force general who sports a fedora and a roguish mustache, declared the small republic’s independence.

And the Kremlin’s latest attempt to control it was due today, after the latest deadline for Dudayev to give up his armed resistance to Moscow’s rule passed at midnight Saturday.

With a cool-hot mix of resignation and unquenchable anger, the Chechens prepared for an upsurge of Russian attacks, possibly including a siege of Grozny, a city whose peacetime population of 400,000 has shrunk by half.

“We want to live peacefully,” said Kutuz, the arms dealer, summing up the Chechen mood. “But if they don’t leave us alone, we’ll destroy everything.”

“Just leave us alone” is the refrain repeated by nearly everyone, from nurses in Grozny’s undersupplied military hospital to the inhabitants of the city’s equivalent of a millionaires’ row.

“You can kill us, but you can’t conquer us,” said Sultan Khajiev, a businessman who refused to name his business. He is a resident of the Grozny counterpart of Beverly Hills, nicknamed Air Street.

Air refers to the thin air out of which Chechen business people are known for making their money.

Grozny was the base for the greatest bank fraud in Russian history, as well as several plane and bus hijackings. The Mercedes-Benzes and BMWs that cruise the city’s streets bespeak the breadth of the shadow Chechen economy.

So does a house like Khajiev’s, a red brick monster the size of a small mansion, the likes of which one might find on the bluffs of Pacific Palisades. But the side of mutton hanging from the roof pole might set it apart, and Khajiev, stubbly and decked in a sweater bearing the words Country Club , is Chechen through and through.

“The Russians won’t come in here,” he said. “They will come in only over our corpses.”

Khajiev said he had donated up to 25% of his income--the amount was unspecified--to support Dudayev and Chechnya’s defense, including milk, meat, bread, medicine and arms. His seven brothers, all involved in the unnamed family business, have also helped.

“We’ve evacuated our children so our hands won’t be tied,” he said. “So we’re free to fight and die.”

According to the Russian version of Chechnya’s motive for demanding independence, evasive business people like Khajiev are intent on keeping the republic a police-free zone so they can continue to run arms, drugs and financial scams.

Chechens tell it differently.

On a central corner of Grozny stands a crowded cemetery packed with broken gravestones, a clue to the source of the deep pain of the past that fuels the Chechens’ anger.

In 1944, Soviet dictator Josef Stalin decided that the Chechens, because of the long enmity with the Russians who had colonized them, could not be trusted to defend the motherland against the Nazis. Historians estimate that 800,000 Chechens were stuffed into rail cars and deported to Kazakhstan and Siberia, and 240,000 of them died en route.

“In ‘44, they came in as if with a broom, and they swept us out and half the nation died--for nothing,” said Lech Akayev, a former colonel in the Soviet army and now head of Grozny’s sole military hospital.

The crowded cemetery is covered with Chechen gravestones that were used to pave Grozny’s streets after the Chechens were deported. Only last year were the stones ripped up and put back where they came from.

Now, when the Kremlin tells the Chechens that they must disarm or that they should evacuate their families to Russia, out of harm’s way, it is met only with deep distrust.

Despite the gray cold damp and spitting snow Saturday, the young militants who strolled nonchalantly across Freedom Square with Stinger missiles slung over their shoulders seemed to feel nothing but their burning urge for battle.

“We’ll fight to the last Chechen,” declared Said Turayev, a welder, his eyes bloodshot, his vest packed with seven grenades and hung with six clips of bullets. The traditional Chechen dagger, marked with distinctive curlicues, had the place of honor in his breast pocket.

“If there is a storm, we’ll fight,” he said. “Allah is with us.”

For all their bravado, the Chechens would need more than faith to see them through the firepower that was expected to hit them this morning.

The military hospital had no blood in its blood bank. And even though the capital boasts burned-out Russian tanks left over from an attempted seizure of Grozny on Nov. 26, it showed few signs of organized defense aside from a couple of barricades near Dudayev’s presidential headquarters.

One hopeful poster on Freedom Square proclaimed, “We’ll set our quality against the Russian quantity.” But estimates put Dudayev’s forces at fewer than 10,000, with virtually no air power and little armor.

As reports mounted that Moscow planned to bomb Grozny, some residents remained optimistic--like Hassan Agayev, a historian who works in the frigid halls of Dudayev’s unheated headquarters, coordinating efforts there with those in the countryside.

“Russia cannot afford great losses among its own soldiers,” Agayev said. “They don’t care about the Chechens, but they would have great losses here.”

And the Kremlin must understand, he said, that “if troops come in here, it will be Palestine. It will be a constant war, a prolonged war.”

But along with the optimists, many of Grozny’s stoic, apprehensive residents are simply people with no escape, including ethnic Russians caught in a political battle within their own country.

“I have no money and nowhere to go,” said Tatiana Kopylova, a nurse at the military hospital. “Everyone wants peace, they want the war to end, they want the presidents to sit down and talk, because it’s the women and children who suffer.”