* Moscow's leading galleries to leave commercial business
* Russian collectors have left en masse
* Critics fear appeal to state will strip art of its edge
By Alissa de Carbonnel
MOSCOW, May 4 (Reuters) - Russian billionaires are famous for being big buyers of contemporary art, bolstering sales in capitals across the West, but at home it's a different story.
Dejected by Vladimir Putin's return to power, many of Russia's glitterati have left, turning their backs on a fledgling modern art market that may now have to seek help from the state - the people who scared off its potential patrons.
"These collectors who left en masse, they are people who saw that not only is there a suffocating situation but that it will continue for a minimum of six years," gallery owner Marat Gelman said, referring to Putin's return to the Kremlin for a third term. "They are not seeing their future in Russia."
Gelman was at the forefront of a movement to pioneer Moscow's first contemporary galleries in the 1990s, setting up his Gelman gallery alongside the Aidan and XL galleries to cater to the rich and famous seeking trophies of their wealth.
But those trailblazers now say their regulars have largely left Russia, leaving their luxury market in the hands of rich bureaucrats, who neither want to draw attention to their wealth or spend on art that is often critical of the Kremlin.
"When the richest people are bureaucrats - deputy ministers, the children of governors, the wives of mayors - then these people are ashamed of their wealth," Gelman said. "They would rather buy some expensive yacht far from everyone."
Each of the three trendsetting galleries is changing in its own way to respond to plummeting sales but they joined forces last month to communicate their message: To survive, modern art in Russia needs state support.
"We cannot stay silent. Russian art needs help," said Yelena Selina, whose XL Gallery is a stalwart of the Frieze, Art Basel, Fiac and Miami Basel international art fairs.
"Huge amounts of (state) money are being spent on creating a positive image of Russia. Modern art is a great calling card."
But her decision and that of Gelman gallery to move to a non-commercial format met with scepticism from other artists who said the state would do little more than sap the oxygen from a milieu that strives to be provocative.
"BEAT THEM ON THE HEAD"
President Dmitry Medvedev's decision to step aside for Putin after just one term crushed the hopes of many entrepreneurs and art collectors who had invested in his promise to modernise the economy, fight corruption and allow the opposition more say.
For many who left, it drew back the curtain on his image as a Western-leaning reformer to show Putin pulling the string.
Viktor Bondarenko, one of the country's top collectors of contemporary and other Russian art, said that while he had not joined the stampede out of Russia, he had lost faith in reforms and sent his three children abroad.
"Modern art is the hope of the country in modernisation and innovation," he said. "When hunters go after cats they beat them on the head with cudgels - that is about what the state and the church have done to contemporary art and hope here."
Roughly 1.25 million Russians have left the country in recent years, according to data released last year by the state Audit Chamber, which tracks migration via tax revenues.
Ekho Moskvy radio cited the head of the state body Sergei Stepashin comparing the wave of emigration to that after the 1917 Bolshevik Revolution.
At Aidan Gallery's farewell party, artists stood smoking and gloomily discussing the impending changes at Vinzavod - a Soviet-era wine factory converted into a hip gallery complex.
"It is a signal that there is a roll back of democratic freedoms and values," said Russian artist Aristarkh Chernyshev, who is represented by XL Gallery. "The galleries spoke about the art market, but if it is shrinking then this is a medical fact."
It comes as a shock to Moscow's globetrotting elite that Moscow's once-thriving galleries are losing money while in the West, stuck in an economic downturn, sales are healthy.
Aiden Salakhova of Aiden Gallery says she made about half as much last year compared to sales in 2003, when the launch of the Moscow Biennale of Contemporary Art put the city on the cultural map and galleries mushroomed - many launched as vanity projects by the girlfriends and wives of Russian oligarchs.
Salakhova said her total profit last year after expenses was $60,000 - a paltry sum in the billion-dollar sector. A successful artist in her own right, she has been financing the gallery out of her earnings.
"If the gallery had been making money over the last two, three years, I wouldn't close," said Salakhova, who like her contemporaries is keeping her Vinzavod gallery space but converting it into an artists studio. "I cannot keep the gallery afloat. I'm not an oligarch or an oligarch's wife."
Gallery owners say wealthy Russians are increasingly snubbing homegrown artists for more established Western names, both as a surer investment and a status symbol abroad.
"It's no secret, all the collectors have left. Their children, the next generation of potential collectors, are at school in London ... to socialise they are buying famous Western artists," Selina said. "The market here is frozen because of the unclear political situation."
Sales have also been hurt by an upsurge in political art, inspired by and feeding into a wave of mass street protests against Putin's 12-year rule.
The shift has sparked controversy after a top Russian art prize was awarded to a non-commercial project last year.
Radical art collective Voina (War) won the 400,000-rouble ($13,600) Innovation Prize by the state National Centre for Contemporary Art for a painting of a giant phallus on a cantilever bridge in St Petersburg that rose to face the offices of the Federal Security Services, successor to the KGB.
The group's leaders were jailed last year for another street protest but bailed out by British street artist Banksy.
Others have not been so lucky. Russia's jailing since March of members a women's punk band that sang an anti-Putin protest song in Moscow's main cathedral sent a collective shudder through the art world. Many see it as a sign of a larger battle to come over freedoms under the ex-KGB agent's new term.
"The works of a modern artist acts like a mirror and for some it may be an unpleasant reflection, including for the authorities," Vinzavod's director Yelena Panteleyeva said.
Despite Gelman's success partnering with municipal officials to transform the provincial city of Perm into an art hub, many doubt avant-garde art exhibits will draw federal sponsorship.
"What can you expect from the state when in the best of scenarios some secretary of a deputy, deputy minister of culture attends the Art Moscow opening?" asked Pierre-Christian Brochet, a French publisher and collector of modern Russian art.
"There is a respect for modern art in the West, here I have never seen any sign of that support that you are hoping for," he told gallery owners during a round table held at Vinzavod. ($1 = 29.5045 Russian roubles)
(editing by Elizabeth Piper)