Terrorism has become a part of our habitat but conceptualization of this phenomenon, as well as formulation of a coherent counter-terrorist doctrine, are lagging behind. One reason for this may be a common linking of terrorism with war which reduces the complex dichotomy of these two phenomena to a simple two-step sequence. The article introduces a schematic model of the external formatting context of the ‘war–terrorism’ dichotomy and applies it to the specific case of terrorism in the Second Chechen war. The underlying question is whether the apparent deadlock in this conflict is the result of Russia's inability to achieve its goals due to weakness of its military muscle – or of the continuing instrumentalization of hostilities by its leadership towards a range of internal and external political goals. The analysis shows not only how a secessionist conflict can develop a terrorist dimension in response to a brutal application of force, but also how this dimension could be utilized for consolidating the hegemonic power that controls the war. Instead of measuring the ‘terrorism–war’ dichotomy as an external impact (or ‘risk’) for a state system, we should rather contemplate its functions inside this system.