Oct. 19 (Bloomberg) -- The State Hermitage Museum, Russia's largest collection of art, today said it is closing its branch in London because of funding problems and rising exhibition costs.

The five Hermitage Rooms opened in November 2000 in the 18th- century Somerset House next to the Thames, sharing space with the Courtauld Institute of Art. The space was sponsored by a $7 million gift from the Hermitage Development Trust headed by British financier Jacob Rothschild and his friend Mikhail Khodorkovsky, the founder of OAO Yukos Oil Co.

``Rising exhibition costs, at a time when funding is increasingly hard to obtain, have led the Courtauld and the Hermitage to shift the focus of their alliance from exhibitions to scholarship,'' the Hermitage said in an e-mailed statement to be released today.

President Vladimir Putin cemented state control over Russia's oil industry after Yukos, the country's largest oil exporter, went bankrupt in 2006. Khodorkovsky, once Russia's richest man, is serving eight years in a Siberian penal colony for tax evasion and fraud, charges he has repeatedly denied. He was a critic of Putin and his arrest led to protests outside Russia.

The Hermitage is trying to make its collection of nearly three million items more accessible. Less than five percent of its collection is on display in St. Petersburg.

Last Show

The current exhibition in the Hermitage Rooms, ``France in Russia: Empress Josephine's Malmaison Collection,'' is the last to be held there. The rooms have hosted a dozen shows that have attracted up to 500,000 visitors, the Hermitage said.

The Hermitage has a branch in Amsterdam, and in March it signed an agreement to open a branch in Ferrara, Italy.

It also runs an exhibition space in Las Vegas with the Guggenheim. Both museums said they signed an agreement with the city of Vilnius, Lithuania, to conduct a feasibility study for opening a joint branch there. Neither museum would comment further.

The Hermitage also announced that it will send one of its greatest works of art, Matisse's ``The Dance,'' to the ``From Russia'' exhibition that opens at the Royal Academy of Arts in London on Jan. 26, 2008.

The Hermitage's Director Mikhail Piotrovsky said in the press statement: ``Our staff have had a unique opportunity to participate in the scholarly activities and cultural life of London.''

Today's announcement also follows strained diplomatic relations between Britain and Russia over the radiation-poisoning murder in London in November 2006 of Alexander Litvinenko, a Russian defector and former KGB agent.

To contact the reporter on this story: John Varoli in St. Petersburg at jvaroli@gmail.com

Last Updated: October 19, 2007 04:02 EDT