By James Kilner

MOSCOW, Nov 1 (Reuters) - The International Red Cross will end aid parcel handouts in Russia's north Caucasus this year marking an end to Chechnya's humanitarian crisis, the group's Russia chief said on Thursday.

Chechnya is the last region in Europe where the Geneva-based International Committee of the Red Cross (ICRC) still hands out the parcels -- basic foodstuffs, toiletries and other essentials -- and the decision brings to an end a 13-year-long project.

"There is a shift from humanitarian emergency needs to more recovery, social, rehabilitation and development needs," the ICRC's Russia director, Francois Bellon, told Reuters in an interview.

Russian soldiers marched into mainly Muslim Chechnya in December 1994 to subdue an independence drive, starting a conflict that destroyed the region, forced tens of thousands to flee and killed thousands more.

Sporadic fighting still peppers Chechnya and violence has spilled over into neighbouring Dagestan and Ingushetia, but the intensity has dropped away and the Kremlin now wants to present the region as stable and peaceful.

"The situation of the people is still precarious but they require a new mode of assistance," said Bellon, a 49-year-old Swiss. "Today you do not give flour and sugar in the north Caucasus, you need to give employment."

The ICRC started handing out aid parcels in 1995 and Bellon said the last parcels would be handed out in December to around 30,000 people.

JOBS NOT FLOUR

Both the federal Russian government and the Chechen government headed by Ramzan Kadyrov, a former rebel who controls a personal army, have poured money into reconstructing Chechnya.

Traffic jams have returned to the streets of the capital, Grozny, and people stroll pass policemen carrying rifles and soldiers guarding their bases as they browse shops selling mobile phones.

The ICRC now plans to try to encourage development by giving cattle to herders and sewing machines to dress makers.

"It is certainly not to withdraw and it is certainly not to phase out. It is to adjust," Bellon said.

He rejected allegations from some commentators and media that Kadyrov had pressured the ICRC into ditching the aid programme in order to underline Chechnya's return to normality.

"No, we're in command," Bellon said of the ICRC projects.

The ICRC had started to review the aid programme in 2005, he said, and it has decreased its Russia budget over the last few years from around $40 million in 2003 to $23 million this year and an estimated $15 million in 2008, Bellon said.

Problems still haunt the north Caucasus -- such as discovering what happened to the thousands who simply disappeared and improving prison access -- but it has stabilised, Bellon said.

"Let's hope we will not have to turn back to emergency assistance again," he said.

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