The Observer reports:

It was Moscow's most shamelessly elite nightclub, a place where you had to be beautiful, über-rich or well connected to get in - a symbol of the Russia of the oligarchs.

Since it opened in spring 2006, the Diaghilev Project had become the favourite party venue for Russia's fun-loving billionaire elite. Its denizens included playboy oligarch Mikhail Prokhorov, worth $15bn; Russian tennis star Marat Safin; and Roman Abramovich's ex-wife Irina, who let her hair down here after her divorce from the Chelsea FC owner. Liz Hurley and Naomi Campbell have also popped in.

But Diaghilev's notorious club nights have now come to an abrupt halt, after a mysterious fire last week gutted the historic building in the city centre. The blaze started on Thursday morning. It spread rapidly, engulfing the baroque loggias and VIP chill zone, where celebrities and millionaire businessmen relaxed in the company of willowy teenage models. It burned the rococo furnishings. Even the lavatory downstairs - surprisingly of the squat variety - was not spared.

Three people suffered minor injuries. The handful of employees on duty managed to escape. But the redbrick four-storey building, in Moscow's Hermitage Gardens, was gutted.

Yesterday all that remained was a tangle of metal piping. The club's catwalk - used for fashion shows and pyrotechnic displays - had disappeared. (There was also no sign of the hairless male model who performs an erotic dance with a swan.) Also gone was the stage where guest DJs once played Diaghilev's house anthem: 'I can't wait...for the music to begin.' 'There was a fire,' a security guard said laconically. 'The club is finished for now.'

Russia's internet was awash yesterday with rumours that the blaze was started deliberately. Bloggers and the Moskovsky Komsomolets newspaper joked that the club had burnt down because the firefighters who had been called to the scene had failed to pass Diaghilev's notorious and draconian face-control policy. All Moscow clubs operate a policy of face control; employing fayce-kontrol-sheeks. But Diaghilev was known for having the most uncompromising door staff in Russia.

The club's bouncer, Pavel Pichugin, was a minor Moscow celebrity, known as Pasha Face-Control. His cruelty was the stuff of legend. Girls without model looks, milky-white skin and perfect teeth stood no chance of admission and were turned away; for men, the main criterion was wealth. 'The policy is to have really rich people and beautiful girls,' one clubber, Stefan, said last September. 'That's it. Entry to Diaghilev is free - but it's very hard to get in.'

Mere mortals could also buy a table - $3,000 for a modest spot on the balcony, going up to $15,000 for the 'imperial' box, decorated with faux-Renaissance portraits. For this, you got your own 'elitny' lavatory, seating space for 15-20 friends and a scowling, black-suited bouncer to keep away hoi polloi. Journalists invited to watch the celebrities, meanwhile, had to wear orange labels to make clear they had not passed the face-control test.

LR: This in a country not in the world's top 50 for per capita purchasing power GDP or its top 100 for male adult lifespan. Remind of of Russia just before the Bolshevik revolution? It should.

Diaghilev is owned by three Russian businessmen, one of whom is Andrey Goroby, the club's shaven-headed founder, who often appeared at party nights dressed in a red, Butlin-style frockcoat. Yesterday one source at the club suggested that Diaghilev would re-emerge soon, possibly somewhere else. 'Andrey is a very clever guy. I'm sure he will come up with a new idea in three months' time. He has just opened a club in Prague. He is a very, very successful entrepreneur,' the source said.

Officially the fire started because of an electrical fault. 'There has been no proper forensic examination. We don't know what happened,' Diaghilev's spokeswoman, Maria Katko, said.

But Moscow's beau monde, who spent their weekends partying at Diaghilev, believe the fire was no accident. One theory suggests the club's owners may have been involved in a business dispute with their landlord. Another says that a rival club burnt down Diaghilev in an attempt to steal its super-rich clients. And according to yet another theory, Diaghilev's owners were planning to close the club in April, because of diminishing popularity and falling profits.

Whatever the truth, Diaghilev's demise marks the end of an era for Russia's cosmopolitan elite, for whom the Putin years have been a belle époque. On 2 March Russia holds a presidential election, with Vladimir Putin stepping down as President in May. Putin is expected to carry on as Russia's de facto leader once his anointed successor, Dmitry Medvedev, is installed in the Kremlin. But there are compelling signs that the extraordinary economic boom in Russia resulting from rising oil and gas prices could be coming to an end.

Last week, Russia's banks called for an urgent meeting with government officials, citing the threat of an imminent liquidity crisis. At the same time, Putin's administration seems powerless to deal with inflation - running at more than 2 per cent a month. The deteriorating economic situation affects Russia's poor more than its rich, especially the country's 30 million pensioners. But even among the country's millionaires there is a sense of growing nervousness about what the Medvedev era might bring and a feeling the party is coming to an end.

It is not clear, meanwhile, what will happen to Diaghilev's pre-Soviet listed building. It was originally constructed as a rival to the Bolshoi - although the plan was abandoned in the early 20th century.

A government-linked construction firm has been pushing to redevelop the building, which occupies valuable land. Over the past five years 5,000 historic buildings in the Russian capital have burnt down, many as the result of arson. 'Nobody knows whether this place will be rebuilt,' one security guard said yesterday.