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Russian property projects on ice as oligarch runs out of cash

A year ago the Kremlin encouraged some of Russia's richest developers to commission landmark, some would say brash, buildings that would be a visible sign of the country's wealth and development.

But now with oil prices plunging and the cost of credit soaring many projects are being put on hold leaving silent building sites across the capital city.

Many oligarchs borrowed heavily against their paper wealth. But as share and asset values plunged, that paper wealth began to evaporate, prompting bankers to ask for their money back.

The oligarch behind many of these projects, Georgian-born Shalva Chigirinsky, has been buffeted by the financial crisis. Desperate for cash he is currently negotiating with oil company Sibir Energy, of which he is a big share holder, for a £230 million bail out.

He is hoping the company will buy eight distressed real estate assets including the New Holland Island redevelopment in St Petersburg, the Irkutsk Tea Factory development in Siberia, and the Russia Tower, a Sir Norman Foster designed landmark destined to be Europe's tallest building when complete but which has been put on hold because of the financial crisis.

In fact Lord Foster's company does not fair well in the current economic climate in Russia. As well as the Russia Tower in Moscow work on the nearby Federation Complex, set to be Moscow's equivalent of London's Canary Wharf, has halted. The Rossiya Hotel site, once an eyesore yards from the Kremlin, set to become an upmarket new district with hotels, shops and apartments, has also been put on hold. As has a diamond shaped development in the heart of Siberia.

Another Foster project, a giant new art gallery shaped like a sliced orange on the banks of the Moskva River, is also in doubt and a gigantic tent-shaped crystal cone that would have housed an entire Moscow suburb also seems unlikely to come to fruition anytime soon. Called Crystal Island, the Foster designed project has been described as Moscow's equivalent of La Defense in Paris.

Edinburgh-based RMJM Ltd could also be hit by the downturn. It drew up plans for a futuristic new tower in St Petersburg for energy company Gazprom. But Gazprom is cutting back on its spending.