Snubbed Vladimir Romanov may turn his back on Scotland, warns aide

• Hearts controversial majority shareholder Vladimir Romanov, left, arrives for a game at Tynecastle stadium with his right-hand man Sergejus Fedotovas Picture: SNS

Romanov is embroiled in a dispute with Edinburgh City Council over his plans to develop Tynecastle, where he hopes to build a new 10,000 seat main stand.

Meanwhile, the tycoon has spent more than three years trying to get a banking licence for Ukio Bankas, but the UK finance regulator has yet to grant him one.

Close aide Sergejus Fedotovas told The Scotsman that Romanov has invested 60 million in Edinburgh, including 23m in taxes, and said that frustrations over his plans raise questions over claims that Scotland is "open for business".

Fedotovas, a director at Hearts and Romanov's right-hand man in Edinburgh, said a health and safety rule restricting expansion of the ground to 10 per cent of the current 17,200 capacity would render its plans financially untenable. Safety regulators warn that flammable chemicals stored at a nearby distillery mean he cannot turn Tynecastle into a 24,000-seater stadium. An original 51m plan that would have included a hotel and commerial space has already been scaled back.

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The latest plan would bring a further 2m of revenue to the club and inject another 500,000 into the local community.

The club acknowledges that its current average attendance of 14,500 would not fulfil its ambitions and that the projections rely on improvements that will draw bigger, if not sell-out, crowds. It says there is a latent support that could be tapped if Tynecastle was a more attractive venue to visit.

But the project is in danger of being frozen out despite a council spokesman saying: "We are still in discussions with the Hearts board over their proposed redevelopment plans."

Fedotovas said the stand-off with Edinburgh City Council over the stadium plan and the Financial Services Authority, which has prevented his bank from opening, cannot continue indefinitely.

"What would any intelligent business look at? We would definitely have to reassess our plans," he said. "A decision may have to be taken to minimise our investment and just support the club, or to walk away by selling the club."

He added: "Selling the club is an option because there is nothing that prohibits us from doing that.We are not discussing selling the club at present but if no one cares and no one is interested it could be an option."

He said Ukio Bankas's first branch in Castle Street was registered in 2005 and that its plans involve relocating to St Andrew Square where it owns a former Royal Bank of Scotland building that has stood empty for years.

Romanov put the Ukio Bankas name on Hearts shirts and Fedotovas said the exposure had raised the bank's profile internationally.

But Romanov is now anxious to move the bank on to the next stage. The plan is to begin operating early next year with about ten staff and serve up to 20,000 retail and business customers. The club has a database of small firms who have links to Hearts and could form the backbone of a customer base.

There is a longer term plan to open another two branches in the city but Fedotovas said the plans have been held up despite government appeals for new entrants to the banking sector. "We expected to get a licence in 2009," he said.

"There was a lot of positive information from the FSA and we were told it would be a matter of weeks. They were investigating compliance and certain practices and we have provided the required information and shown we are fully compliant."

Because of the delays a small number of retained staff have been laid off and the company's plans have been put on hold.

"We are still positive. We have not been told no," said Fedotovas. "But if there is no green light for a long time we would go."

The Financial Services Authority said securing a licence was complicated but it did not comment on individual applications.

Ukio Banko Investicine Grupe (UBIG), Romanov's investment vehicle, last week rubber-stamped a debt for equity deal that sees another 10m wiped off Hearts' debt and lifts Romanov's stake from 95 per cent to 98 per cent.

The club has admitted it will be exploring relocating to a proposed new sports arena on a green-belt site in west Edinburgh.

The Scotsman revealed last month that both Edinburgh Rugby and Hearts were being wooed over a new stadium proposed by Rangers owner Sir David Murray's property empire for the Hermiston area.

Hearts chiefs said they are "open-minded" over such a move - despite previous hostility from fans to leaving Tynecastle - but insist they will "exhaust every option" for redeveloping it.

Fedotovas said yesterday that a move to Murrayfield had appeared attractive initially and pointed to the club's 58,000 attendance for a friendly against Barcelona, but he said Murrayfield was not a football stadium and would not work for Hearts.

The trouble over the nearby North British Distillery relates the storage of chemicals. The relocation of whisky storage facilities from a local distillery was shelved several years ago.The club has considered paying for the distillery to relocate its storage facilities.

The council has insisted the club makes up its mind over whether it still wants to buy the former Tynecastle High School building, which it had agreed to buy for 4 million, for future phases of the redevelopment.

A Hearts spokesman said the challenges the club faced in redeveloping Tynecastle were both "health and safety and political".

A senior council source told The Scotsman that it needed to know what was happening with the high school site and whether the club planned to use it in future as it was a major asset for the council.