Delays hit building sites as plunging oil prices leave oligarchs cash-strapped
From John Follett in Moscow

Moscow's transformation into a showy Dubai of the east has been put on ice as plans for some of the world's brashest examples of modern architecture have stuttered because of the world's financial crisis.

The Kremlin wanted the Russian capital to become home to a vibrant oil-fuelled financial centre to reflect the country's growing international clout. It was a dream shared by the oligarchs who were falling over themselves to commission landmark buildings that would become monuments to black gold.

But as the price of oil has plunged and the cost of credit soared, those dreams have fallen apart, leaving the city pockmarked with unsightly building sites.

The reason: 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. At the same time, demand for their bombastic edifices faded.

The fallout has been grave. Two towers, which when finished would have been Europe's tallest and second tallest skyscrapers, are in limbo. Work on one - the Norman Foster-designed Russia Tower - had barely begun before construction stopped. Work on the other - part of the so-called Federation Complex - has also run into delays.

Meanwhile, the Kremlin insists its plan to turn Moscow into a financial centre to rival London and Frankfurt is on track. But with the stock market down more than 70% and oil prices tanking, it looks like wishful thinking.

A painful reminder of the government's shattered ambitions lies yards from Red Square and the Kremlin. The site was once home to the Rossiya Hotel, a Soviet eyesore. It is being demolished to make way for another Lord Foster design - an upmarket new district with hotels, shops, and apartments. But legal problems and the credit crunch have halted demolition. Today, the site is derelict, a symbol of a city-wide reality check.

It is also unclear whether plans to erect a giant new art gallery on the banks of the Moskva River - again thanks to Foster - will be realised. Some will be quietly pleased as the futuristic design (the building would have been shaped like a sliced orange) angered traditionalists who felt it was inappropriate for such a central location.

Another Foster creation - 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 project would, if realised, be Moscow's equivalent of La Defense in Paris.

Just months ago it looked like the prolific Foster would play a pivotal role in the biggest facelift Moscow has seen since Stalin rearranged it in the 1930s. Although Foster's website still lists seven Russia-related projects, five have been hit by delays. Of the seven, none was more symbolic of Russia's oil boom than a giant diamond-shaped development to be built in the heart of Siberia's oil-producing heartland. That, however, has been put on ice.

THE oligarch behind many of the Foster builds - Georgian-born Shalva Chigirinsky - has been buffeted by the financial crisis. Hungry for cash, he sold some of his properties to a London-listed oil company called Sibir Energy. He is a big shareholder in the firm and is trying to get it to buy more of his developments, including the Russia Tower.

A Scottish company - 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 behemoth Gazprom. But there are signs the project may face delays as Gazprom and the city tighten their belts. That too would delight many city residents and preservationists who felt the tower would spoil the city's skyline.

As the crisis worsens, the Kremlin is urging calm. Prime minister Vladimir Putin went on state TV last week to try to reassure people that the country could weather the storm. The main reason for optimism, he said, was Russia's gold and foreign currency reserves. The reserves, of around $450 billion, are the world's third-largest after China and Japan.

Kremlin officials will be nervously watching the price of oil, though. If plans to turn Moscow into a Dubai of the east are to be realised, oil prices will need to stage a dramatic recovery long before the reserves run out.