Russian aluminium major Rusal has defaulted on payment of $700 million in cash payment to billionaire Mikhail Prokhorov for his 25 per cent stake in mining giant OAO GMK Norilsk Nickel.

Rusal is believed to have agreed on a new deadline, according to sources at Prokhorov's investment vehicle Onexim.

Debt-ridden Rusal had already paid a major chunk of the $7 billion in cash payment it owed Prokhorov but could not meet the 24 October deadline for the remaining $700 million.

Prokhorov was to receive a 14 per cent stake in Rusal and an estimated $7 billion in cash, for his 25 per cent stake in Norilsk Nickel, the world's biggest nickel miner.

UC Rusal, controlled by Russian tycoon Deripaska Deripaska, was locked in a battle for control of Norilsk Nickel, once worth more than $40 billion (€32 billion, £25 billion) and now worth around $10 billion.

But that money has been lost with Russia's tumbling stock market and Deripaska now faces a possible divestment of his Norilsk stake.

Desperate to refinance a $4.5 billion loan from western banks that paid for part of his 25 per cent Norilsk stake, Deripaska is reported to have met with senior British politicians on his yacht.

If he fails to get an extension of a waiver on repayment from the western banks or a bail-out from the Russian state by the end of next week, he could be forced to hand over the stake to creditors, insiders say.

Rusal is now looking to Kremlin for refinancing the loan.

The credit crunch has wiped an estimated $230 billion off the peak $300 billion total value of stocks held by Russia's oligarchs. And, in a reverse of the 1990s privatisations, the cash-rich government is now in a position to leverage business acquisitions in the country.