The 45,000 square-meter arcade, a department store in pre-revolutionary times located at No. 5 Red Square, is owned by the presidential administration.
The Kremlin's plans, estimated to cost $300 million, would double the building's floor space, and include underground parking and an auction house.
In 2001, the Kremlin property department announced that French corporation Bouygues had been selected to build the center, but the deal fell through a year later when Bouygues withdrew.
In the spring of 2002, the department signed a contract with Spain's Segura Consulting, which was supposed to find investors for the project.
Segura said that Ferrovial, Spain's largest construction company, and Caja de Madrid Bank would finance the project. A second Spanish bank, Banco Inversion S.A., replaced the former this summer.
After City Hall slapped the preservation order on the building last week, the project once more came to a halt.
Yulia Nikulicheva, senior analyst with Jones Lang LaSalle, said Moscow developers often have to work with historical monuments and are used to preserving facades and other protected features. But according to the preservation order, as well as the main building, its four wings are also protected.
The Kremlin's development project entails the demolition of the wings and aims to increase Kremlyovsky's floor space to almost 90,000 square meters. "We are not ready to comment on how this decision by the Moscow authorities will influence the project as we are studying the document," said Viktor Khrekov, a spokesman for the Kremlin property department, adding that it would make a public statement in about a week.
Khrekov said the building's new status would stop the redevelopment project. "This is a very strange decision that came at a time when many of Moscow's famous buildings are being demolished," he said.
Yury Orlov, the deputy general director of Segura Consulting Associated Russia, S.L., said the potential investors would issue a statement later this week. He said that a ban on the demolition of the wings would make the planned expansion plans problematic.
According to Moscow city statutes, once a building enjoys protected status, all restoration activities must be approved by City Hall's department for monument protection -- and the building's appearance cannot be modified in any way.
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