Collapse of debt deal threatens Russian media firm

The war between the Kremlin and Media-Most, Russia's biggest independent media company, increased yesterday when the state-controlled gas monopoly abruptly backed out of a deal that would have cleared Media-Most's debts.

The war between the Kremlin and Media-Most, Russia's biggest independent media company, increased yesterday when the state-controlled gas monopoly abruptly backed out of a deal that would have cleared Media-Most's debts.

At stake is the future of Media-Most, owner of the NTV television station and other media outlets - all critical of the government.

Prosecutors issued a warrant earlier in the week for the arrest of Vladimir Gusinsky, the head of the media group, who left Russia in July after spending three days in prison.

Gazprom, the natural gas monopoly that is Media-Most's largest creditor, withdrew itssignature yesterday from an agreement signed last Saturday. Under the deal Mr Gusinsky would have relinquished control of parts of his media empire, in which Gazprom would then have become the main shareholder.

Media-Most said the cancellation of the deal came as "a complete surprise". It claimed that the agreement, reached by teams of lawyers on both sides, had been repudiated at the last minute because of pressure from the prosecutors.

The Kremlin has been unrelenting in its pursuit of Mr Gusinsky, who was one of the oligarchs who made fortunes, mostly thanks to their political connections, in the 1990s.

Mr Gusinsky supported President Boris Yeltsin in the 1996 election, but has been harshly critical of President Vladimir Putin. Mr Gusinsky, who is reportedly in either Britain or Spain, is refusing to return to Russia to answer questions on fraud charges.

The threat to Media-Most's independence stems from its debts, including $473m (£329m) owed to Gazprom, which was guarantor for two loans made by Credit-Suisse First Boston. Under the deal agreed at the weekend 46 per cent of the company's shares would have gone to Gazprom and another 19 per cent would have been sold to foreign investors.