Chelsea told to pay £29m or miss out on Brazil prodigy

Champions' main summer deal under threat as Neymar is offered new contract by Santos

Chelsea's attempts to pull off their marquee signing of the summer with the Brazilian teenager Neymar hit an impasse yesterday when the player's club Santos offered to make him their highest-paid player and refused to consider any offer less than their €35m (£29m) valuation.

The negotiations to sign Neymar have reached the stage where Chelsea officials are considering withdrawing to pursue alternative targets or risk being forced to pay way beyond what they consider reasonable for an 18-year-old. The Santos president, Luis Alvaro Oliveira, has briefed the Brazilian media that the player's price is non-negotiable and he will not budge.

Chelsea have already missed out on Fernando Torres and Mesut Ozil this summer, two players who, at different points during the last three months, they were fairly confident of signing. Neymar is the new young star of Brazilian football and Santos have organised a concerted effort to keep him away from European clubs unless they get their prohibitively high price.

The club are understood to have offered Neymar a rise from his existing salary of 160,000 Brazilian Reais (£58,000 a month) a month to 600,000 Reais (£220,000 a month) as well as a share of commercial deals. The talks have taken place between the player's father, Neymar Silva, and his agent, Wagner Ribeiro. They have not agreed to anything but Santos are confident they will persuade the player to stay.

In Brazil it is thought that the impetus behind the move to Chelsea is coming from Ribeiro and the player's father rather than Neymar himself. The player has said that he is not interested in "playing in the reserves". He and his representatives have told Santos that they will respond to their contract offer tomorrow.

Chelsea have already had an offer of £17m for the player rejected and there has been a suggestion that they would be prepared to go as high as £23m. Paying that much for an 18-year-old would, regardless of his talent, represent an enormous gamble for the club. It has not exactly helped their cause that Mano Menezes, the new Brazil coach, has also publicly declared that Neymar should not leave.

Chelsea have signed Yossi Benayoun from Liverpool and Ramires from Benfica this summer but they have not yet managed to bring in the high-profile name that would really capture the imagination. Neymar is not an established international – he made his Brazil senior debut this month – but such is the competition now even for relatively unproven players he would still represent a coup.

The club say their manager, Carlo Ancelotti, has no interest in signing the Brazilian Benfica defender David Luiz, 23, as a replacement for Ricardo Carvalho. Instead the suggestion is that they have alternative targets in Brazil if the Neymar deal falls through. The other great hope in Brazilian football is Paulo Henrique Ganso, who also plays for Santos and made his Brazil debut in the friendly against the United States this month.

Chelsea have denied any suggestion that the acquisition of the Dutch Eredivisie club Vitesse Arnhem by the Georgian businessman Merab Jordania has any connection with Roman Abramovich. Jordania is a friend of the Chelsea owner but the English club say that reports linking Abramovich and the finances to buy Vitesse are inaccurate. However, there could be an agreement to loan players between the two clubs.

Chelsea's Brazilian defender Alex da Costa has said that Ramires, an £18.5m signing, could make a similar impact at the club as Michael Essie. Alex said: "I was talking with Jose Bosingwa and we were saying how Ramires is a lot like Michael Essien.

"He's not as strong as Essien but he has the same style on the pitch. He goes forward very quickly, then he comes back and marks very well. He's a very good player. It's very important for me and the team that the midfielders go to shoot and arrive at the goal but then get back to mark.

"He's almost the same as Michael Essien like that, so I am expecting a lot of goals, which is important for us. He will get to play with Michael Essien, John Obi Mikel and Frank Lampard, we have a very good midfield group and he will do a great job for us."