The magnificent auditorium is falling down. The once superb performances have lost their sparkle. And with the government stepping in to sack the director, ordinary Russians have finally had to admit that the Bolshoi, the greatest ballet in the world, has hit a crisis.

While Russian dance companies continue to tour the world, wowing audiences and critics alike, the former template for ballet is in chaos. The history of the Bolshoi has in fact followed closely the history of the political system that controls it.

In the 1960s, with Soviet power at its height, the Bolshoi, situated across the street from the Kremlin, turned out legendary performances under director Yury Gregorovic. In those days Western audiences flocked to the handful of excursions the company made across the Iron Curtain.

Then came the fall. With the collapse of communism, the theatre has floundered. Gregorovic became a tyrant, but refused to budge. Finally, the dancers went on strike in 1995 and Russia's president kicked him out, replacing him with former Bolshoi dancer Vladimir Vasilyev. But this worked no better. Vasilyev made the same mistake with the Bolshoi that the government made with the economy - he tried to control too much. Insisting on personally directing ballets and operas, he also tried to sort out the finances, and control a rebuilding plan for the theatre. The result was chaos with the finances and a further drop in standards.

Where once foreign audiences had been overwhelmed by the Bolshoi's bold strokes, there were now complaints that Russian dance was rigid, unimaginative and out of touch with modern trends. For Russians the final straw came when Vasilyev tampered with what is regarded as untamperable - he rearranged the choreography of Swan Lake.

In October the government of new tough-guy president Vladimir Putin stepped in: Culture Minister Mikhail Shvydkoi was put in charge. His first act was to sack Vasilyev and 20 of his staff.

"The structure is very conservative and very old fashioned. Practically, we keep the socialist island in the market world - that is very stupid," Shvydkoi told The Irish Times.

"The Bolshoi is a very important institute in Russia generally, it influences the general situation in Russia."

He has taken a leaf out of the book of his boss, Putin, who is busy cleaning up corruption and sending police against the once-untouchable tycoons.

Vasilyev's old job has been split in two, with an art director and financial manager being appointed to run the theatre. And for the first time, both men are on fixed three-year contracts, to be renewed only if they get results.

"We must change the system," says Shvydkoi. "We must destroy the old Soviet principle of a contract with a chair, a contract for life."

But changing the captain won't necessarily save the ship: the Bolshoi is quite literally falling down, and many Muscovites consider it already a fire trap. There is, in fact, a rebuilding programme - it was designed after part of the theatre collapsed in 1902, and has never been finished. Now the plan has been overtaken by decay.

A new scheme is afoot to close the entire theatre for rebuilding, moving in the meantime to a temporary venue to be built next door. The problem is the £200 million price tag.

Shvydkoi insists that, with some help from the UN heritage and education agency UNICEF, Russia can afford it, but with nearly half the population on the breadline, the country has other priorities.

In fact, for Bolshoi read Russia: the theatre is stuck in a no man's land between communism and capitalism: cut from the former, but yet to embrace the latter in the form of sponsorship or marketing.

Ironically, help may come by learning the lessons of its greatest rival - St Petersburg's Mariinsky - the renamed Kirov. While the fall of communism has brought only pain to the Bolshoi, it has been a boon for the Mariinsky, which has seen its fortunes soar and its dancing eclipse that of its "older brother".

The Mariinsky's fiery young director, Valery Gergiev, has poured energy not just into opera and ballet but into a phenomenal programme of marketing and world tours that have brought in revenue and critical success.

By opening it up to the world, rather than hiding from it, Gergiev has made the Mariinsky a world force - and last month he hit the jackpot when a US billionaire fan sent him a cheque for £10 million.

Not everyone is convinced the government can fix things: "State-owned art is in a very bad condition. The problem is that there is no clear policy," says Yaruslav Sedov, arts critic for the magazine Itogi.

"The government must choose. If it wants control, it must pay the bill. Or else the system of sponsorship must be made real. Now the Bolshoi is lost between the two systems."

But with the economy in crisis, neither government nor private money is likely to throw the Bolshoi a lifeline any time soon. The one bright spot is that Russia, for all its woes - or perhaps because of them - continues to churn out armies of talented ballet stars.

"We have many good dancers coming through," says Alexander Bondarenko, professor at the Bolshoi Choreography School, the education arm of the Bolshoi. "In this school we have the spirit, and that is the main thing. The spirit is the base on which we build."